Pedal to the Metals

Ted Butler, who recently offered a tutorial on how Comex gold and silver trading works, wrote in a commentary last weekend to paid subscribers:  “One thing that I hope everyone realizes is that we have not declined in gold or silver prices for any reason other than to enable the commercial controllers on the Comex the opportunity to buy as many gold and silver contracts as possible.  The data indicate that these commercials are doing just that, in spades.

In watching the daily price action I have been muttering many things to myself, not the least of which has been the phrase, ‘slicing the salami.’  That’s the term that my good friend and mentor Izzy [Friedman] and I have used to each other over the years to describe one of the commercials’ favorite tricks against the technical funds.  It involves the deliberate setting of a series of new price lows to lure the technical speculators into selling (both long liquidation and new short selling).  Nothing encourages technical selling more than the establishment of a series of new price lows (or buying into new price highs).  It’s like waving a red flag in front of a bull.  Once this process is complete, you are invariably left with an important price bottom.  I haven’t talked with Izzy lately, but I’m sure he would agree that the commercials sliced the salami recently in silver and gold like never before.

The changes in this week’s COT report for gold and silver were spectacular, as they should have been given the price action.  If you have to endure the financial pain from the endless slicing of the salami, the reward should be a commensurate improvement in the market structure.”

Related Links:

MarketWatch:  Gold settles at 2012 low as dollar gains on Greece; silver down 1%

Jesse’s Café Américain:  Gold & silver charts:  More liquidation on Greece and Facebook

GoldSeek/P. Radomski:  What will happen to Greece and gold?; Political and economic factors bode well for gold

SilverSeek:  Is fear of deflation sapping gold and silver?

WSJ:  Price is right for Fed to come on down with stimulus

Bullion Bulls Canada/Jim Cook:  Gold losing battle vs. U.S. dollar in 2012; Doom of the dollar

Peter Grandich/Wealth Cycles:  Gold bears:  Put your money where your mouth is; Safeguarding your precious metals

KWN:  Paul Brodsky – The paralyzing fear among investors today; James Turk – Expect tremendous chaos, Europe deteriorating rapidly

Mineweb/GoldCore:  A shift in Indian gold buying patterns?; Bundesbank confirms German gold held by Fed, BOE and Banque De France

Frank Holmes:  Looking to China to fire up its economy

Perth Mint:  Bron Suchecki:  IMF to buy gold? Not

ChrisMartenson.com:  Acknowledging the arrival of Peak Government

Zero Hedge:  Jim Rogers: A must-see rebuttal to the ‘normal’ CNBC hopium

Reuters/Washington’s Blog: The core problems with JPMorgan’s failed trades

Jim Rickards/Forbes:  Why JPMorgan’s Jamie Dimon should resign; More bad news for JPMorgan as FBI gets involved

The Golden Truth:  It’s simple – Think like a criminal

With gold and silver both closing at multimonth lows on Monday, Dan Norcini points out that the “Gold’s move down towards $1550 has in the past attracted very substantial central bank gold buying. Hopefully this will remain the case as the market is now pushing towards the lower band of an eight month long trading range.”

And with the markets “moving so quickly away from risk and out of basically everything except Treasuries or cash,” he thinks that the Fed “is going to have a major problem on their hands if they do not soon give some sort of signal that they are preparing to act to stem the deflationary decline.”

Norcini also sees China’s lowering of its bank reserve ratio requirements as a sign that it’s “responding to slowing growth there as their export markets are impacted by the woes in the Eurozone and the anemic growth in the US. This is one of the signals that copper has been sending for a while now as it descends in price. Were copper to finally show some signs of a bottom, that would be constructive for silver which is testing chart support down near the $28 level once again.”

Related Links:

Wall St. Cheat Sheet:  Gold and silver decline, dollar higher for 11th consecutive day

Barron’s/Citywire:  Gold goes negative for 2012; Morgan Stanley stays bullish, believes gold may hit $2,175 in 2013

Kitco:  Deutsche Bank:  Commodities outlook mixed for rest of 2010; Precious metals, energy may rise

The Daily Gold/SilverSeek:  Major bottom in precious metals could occur this week; How euro money printing is going to drive up gold and silver prices

BBC/Reuters:  Could the euro survive a Greek exit?; Can Greece even exit the euro zone? Maybe not

The Daily Bell/Yahoo! Finance:  Drop the cash from helicopters!; Frank Holmes:  “When push comes to shove, they’re going to print money“

KWN:  Stephen Leeb:  This is why world markets are incredibly unstable

Zero Hedge:  Meet the latest converted gold bug: The IMF

Alasdair Macleod:  Gold bugs will be vindicated

Mineweb:  HSBC’s James Steel:  Chinese demand, the US election and the outlook for gold over summer

Bullion Vault/GoldSeek:  Gold investment demand in Asia; Frontrunning China’s insatiable demand for gold

Market Oracle:  The yuan, rupee and physical silver demand

The Victory Report:  Richard Russell:  Stay in cash and gold coins

Patrick Heller:  Is US government gold price suppression illegal?

AP:  Gold! Haiti hopes ore find will spur mining boom

Following recent explanations by Jim Rickards on “The hidden role of gold at the IMF,” and central banks’ obsession with gold, Mineweb reports that according to the latest IMF statistics, “at least 12 countries are known to have increased their gold reserves in March, indicating the continuation of a trend now going back more than two years, and one which has been on its own a substantial supporter of the higher gold prices seen over the period.”

That trend “will continue in the medium and long term,” according to a Swiss analyst quoted by Bloomberg, who adds that “Gold will continue to be a preferred central bank reserve asset. It is currency protection and stabilization.”  And a recent Prudent Bear commentary described the huge pent-up demand for central bank gold buying in emerging market countries.

Related Links:

Reuters:  Gold rises 0.3% on Wall St gains; options, Fed in focus; silver off 0.3%

MarketWatch:  Gold at one-week high; weak housing data stoke hopes for more QE

Trader Dan:  Gold chart and central bank buying

Jesse’s Café Américain:  Gold and silver charts – winding, winding…

SilverSeek:  The silver reverse bubble of 2012

Silver Investing News:  Fate of silver lies in investors’ hands

Bullion Vault:  There are still reasons to be excited by gold

Jim Sinclair:  ESM will supply whatever money is needed In Euroland; The implications of China paying in gold

Hard Assets Investor:  Jim Rogers on when to buy gold, Chinese bubbles and fake good news

The American Conservative:  China’s rise, America’s fall

PBS’ Frontline:  Money, power and Wall Street (premieres Tuesday)

GATA:  Are markets arranging a de-facto return to the gold standard?

Got Gold Report:  Ron Paul on CNBC:  Fed counterfeiters

GoldSilver.com:  Sound money takes hold in Utah, Missouri and South Carolina

Fox News:  Gold rush: California’s weekend warriors discover prospecting

Although Monday’s slight drop in gold was attributed to worries about the eurozone, Martin Murenbeeld, chief economist for the Canadian asset-management firm, Dundee Wealth Management, tells Mineweb that the European crisis is “net-net, quite positive for the price of gold.”  Speaking about the above presentation that he delivered at last week’s Precious Metals Summit,  Murenbeeld said, “the high probability case is that the ECB and/or the national banks are going to have to put a tremendous amount of liquidity into the system.”  He cites a firewall study estimating that if “Spain and Italy were to be bailed out in the way that Greece and Portugal are being supported, it would require upwards of 1.8 trillion euros.”

He also sees a 50% probability of further QE from the Fed, either tied to “a Lehman moment” in Europe, or the U.S. economy faltering in the second half of this year:  “And that’s not saying anything about 2013 which is likely to be a weak year if all the fiscal measures that are supposed to be taken at the end of this year, and at the beginning of next year are actually taken.”

More from Murenbeeld in an extensive interview with Barron’s last September, in which he explained why he thinks that gold’s bull market “could last at least another five years, and possibly 10 years or more.”

Related Links:

Yahoo Finance!/Bullion Vault:  The pain in Spain: Why everyone’s freaking out about Europe…again

Bloomberg:  Euro area seeks bigger IMF war chest on Spanish concerns; John Paulson said to short Europe bonds amid Spain concern

Hard Assets Investor/Daily Reckoning: Gold trying to regain upward trend on euro fears; Could gold rise on one country’s meltdown?

Zero Hedge:  At least one Italian export is soaring: Gold

Trader Dan:  Risk off trades hitting the commodity sector

Minyanville:  Technically speaking, precious metals is a mixed bag

Market Oracle:  Gold and silver heading for new highs this year

Seeking Alpha:  Yuan takes next step to free floating currency

KWN:  John Embry – What’s happening in China is wildly bullish for gold

GoldMoney:  Currency wars will boost gold

Financial Sense:  Physical vs. paper: The real war

Reuters:  Comex-monitored silver stockpiles hit highest in at least 28 months

CFTC/SilverSeek:  Key CFTC meeting Wednesday on silver price manipulation as the big short position is naked on the beach

GATA:  Doug Casey asks for and James Turk delivers the evidence of gold market manipulation

The Big Picture:  HFT pirates and their academic friends

Gold and silver gained 1.2% and 3.2% respectively on Thursday after two leading Federal Reserve officials “underlined their support for an accommodative monetary policy,” reports Dow Jones, “saying the fragile U.S. economic recovery still merited support from the central bank.” In a trenchant analysis, Dan Norcini dubs it “The ‘Dudley’ Rally,” referring to comments by New York Fed President William Dudley that “it is still too soon to conclude that we are out of the woods, as underlined by the March labor-market release.”

Related Links:

Wall St. Cheat Sheet:  Fed chatter sends gold prices $20 higher, silver outperforms everything

Zero Hedge:  Gold resumes surge as new QE rumor is back

Patrick Heller:  What is the U.S. government trying to accomplish?

Seeking Alpha:  Precious Metals:  Possibly the most undervalued sector and stocks

MarketWatch/Market Oracle:  China buying gold?; Vietnam goes nuclear on gold

Bullion Vault:  Gold investment in 2012: The bullish and bearish signals

Financial Times/Motley Fool:  GFMS:  Gold rally will resume in second half of year; Don’t give up on gold

Reuters:  Euro hits one-week high vs dollar but outlook murky

Mineweb:  Economist Martin Murenbeeld:  Euro crisis still kicking and will impact gold

Pragmatic Capitalism/CNN Money:  Is Europe’s recession spreading beyond the Eurozone?; IMF’s Lagarde calls for swift action on financial risks

GATA:  Risk off? Having sold most of its own, IMF now lauds gold as ‘safe asset’

Global Money Trends:  Minefields that can blow-up global stock markets in 2012

The Victory Report:  Lew Rockwell:  Central banks steering society off a cliff

Zero Hedge:  PIMCO’s El-Erian breaches the final frontier: What happens if central banks fail?

Seeking Alpha:  Gold and silver are not an investment. They are forever, currency.

Following a mid-January report that China’s consumer sector is growing faster than the overall economy, the Los Angeles Times, in a lengthy article, looks at how those consumers are impacting gold sales:  “China is now bedecking itself in bling. It’s on track to become the globe’s largest consumer of gold as early as this year, knocking off India— whose elaborate wedding dowries kept it on top for years. Some of the gold is going to its central bank as the government quietly boosts reserves. But the biggest driver is Chinese consumers. They’re snapping up jewelry, coins and bars as a hedge against inflation and to flaunt their rising wealth.”

Related Links:

MarketWatch:  Gold inches 0.1% lower on profit-taking, dollar; silver up 0.5%

Telegraph:  Can silver keep up its polished performance?

SilverSeek/GoldMoney:  Silver price rises twice as fast as gold as the eurozone floods with money; U.S. monetary base hits new record

SafeHaven:  What to expect this week for precious metals, gold stocks and dollar

KWN:  Stephen Leeb – What to look for next in gold, silver oil & copper

Bloomberg:  Rising oil prices could send gold “much higher,” says UBS

Tim Iacono:  Why this isn’t your father’s gold market

Mineweb:  Indian gold ETF investment doubled in 2011, set to surge this year

Reuters:  Venezuela & China partner to develop Las Cristinas gold mine

NYT/Bloomberg:  A call for Beijing to loosen its grip on the economic reins; China congress of billionaires makes Capitol Hill peers look like paupers

Zero Hedge:  Art Cashin on why the world is running out of ideas to bail itself out

James Turk:  No reprieve for Greece from debtor’s prison

ChrisMartenson.com:  Ben Davies: Greece is just a preview of what’s coming for the rest of us

Trib.com:  Wyoming House advances doomsday bill

SafeHaven:  The financial system is sick, are precious metals the cure?

Following a report that two Wall Street trade groups are trying to delay CFTC limits on speculation, described as “one of the financial industry’s highest-profile efforts to weaken 2010’s Dodd-Frank law,” Ted Butler writes that 3 1/2 years into its investigation of the silver market, “we have passed the point of the CFTC taking too long for deciding if the silver market has been manipulated in price.”

In his commentary, headlined “Enough is Enough,” Butler also provides background on the CFTC’s two previous investigations, noting that “the agency has spent most of the past decade investigating silver.” He calls on it to “act against the silver manipulation or fully explain why there is no manipulation. This silver investigation has taken so long that at some point blame moves from the manipulators to those responsible for ending it.” More from Butler on “The Three Elements of Manipulation.”

He concludes that “This is the last time I intend to ask that you write to the Commission or, more importantly, to your elected representatives. Simply ask your Congressman or Senator why such an important investigation should take so long. This investigation has taken so long that chances are that you might be writing to a different elected official than previously.”

Related Links:

Dow Jones:  Gold ends 0.9% lower on Greek bailout delays; silver also off 0.9%

Kitco:  European woes to dominate gold next week

Spiegel/Reuters:  Anti-German mood heats up in Greece; Greek police union wants to arrest EU/IMF officials

Gold-Bullion.org:  Once again it’s gold bullion that everyone runs to…including central banks

Business Insider:  Not every kind exponential growth is a bubble

Gold Report:  The gospel of gold according to Peter (Grandich)

MarketWatch/Brother John F:  CME lowers margin requirements for oil, metals

Silver Investing News:  2012 silver forecasts: Are analysts on target?

P. Radomski:  The dollar confirms a possible silver pullback

Jesse’s Café Américain:  US dollar very long-term chart

Got Gold Report:  Santelli to Bart Chilton – Where was CFTC on Halloween?

Zero Hedge:  Manipulation and abuse confirmed in $350 trillion market

Bloomberg:  Fed plays Wall Street favorites in secret deals

Reuters:  Bill Gross:  The twilight of the bond king

Puru Saxena:  Better days ahead?

As a Financial Sense article offers up “A Golden Solution to a Global Crisis,” the Gold and Silver Blog, pointing out that U.S. stock markets have shrugged off a rash of recent apocalyptic economic predictions, even though they’re “coming from some of the most normally sedate institutions in the world such as the IMF and the World Bank,” asks, “Exactly what is going on? The answer is positive for both stocks and gold.  The ‘collective wisdom’ of the markets saw a resolution to the imminent threat of the European debt crisis last fall, and that resolution is known as quantitative easing.

As previously noted in this blog last December, ‘Every Solution to the Euro Crisis Involves Printing Money,’ which is exactly what happened.  Both the European Central Bank (ECB) and the Federal Reserve stand ready to print whatever quantity of money is required to paper over the European and U.S. debt crisis. Long term this does little to solve Europe’s fundamental problems, but is short term bullish for stocks and extremely long-term bullish for gold and silver.”

Reviewing the London Bullion Market Association’s 2012 silver forecast, — by 25 professional analysts, including commentary from each — Mineweb‘s Lawrence Williams writes that “they anticipate an average silver price over the year of $33.98 and a high of $44.49, but even this, which some might consider a conservative prediction, still represents a substantial 39% increase over the current $32 price for the metal.  And taken in conjunction with the gold price forecast, suggests that the gold/silver ratio may come back a bit from the current 52 to around 46 – well above the low point achieved last year and hugely above the so-called historic ratio of 16:1 so beloved of the principal silver bulls.”

Related Links:

Gold Alert/Forexpros:  Fed: No QE3 but low rates through 2014, USD drops, gold rebounds

Kitco/Jesse’s Café Américain:  Comex gold soars to 6-week high in wake of “dovish” FOMC statement

MarketWatch:  Silver leads gains in metals, ends at highest since mid-November

SafeHaven:  Fed to markets:  Buy gold and silver

Trader Dan:  FOMC to markets:  “Welcome to the party“

Reuters:  Bernanke says Fed pondering further stimulus

Zero Hedge:  And the winner is…gold

KWN:  Jim Sinclair – Mainstream entities will now enter gold market; Eric Sprott – Aggressive Chinese buying will spike gold price

Globe & Mail:  Sprott takes a new path toward less volatility

Seeking Alpha:  Silver: Historical upside potential

Arabian Money:  Talk of Dubai Gold Souk: silver to double in six months

Commodity Online:  US gold production gains 2.6%, silver declines 8.7% in 2011  

SilverSeek:  Bullish technical signals support silver and gold prices

P. Radomski:  Dollar’s influence on gold

Murray Pollitt:  Gold is the uninvited guest

Telegraph/NYT:  Davos keynote: Merkel defiant as IMF leads attack on Germany; pleads for patience to let Europe solve its problems/Video (at 24 min.)

Following what is expected to be a record year for central bank gold purchases in 2011, according to a World Gold Council report, Reuters quotes a 2012 forecast by HSBC analyst James Steel, who writes that “The outlook for central bank gold purchases remains positive for this year, based on the likelihood that emerging markets central banks will continue to diversify away from the U.S. dollar. Since U.S. dollar foreign exchange holdings are already at record levels in many countries, we believe these nations will seek to increase gold reserves, in a bid to diversify their USD-laden reserves. While we do not expect official sector activity to move the market near term, we regard central bank purchases as a bulwark of the long-run gold rally.”

Related: 

Kitco:  Gold ends weaker on profit-taking, corrective technical pullback; silver down 29¢

Global Macro Monitor:  Is gold about to get a monetary blast (off)?

CNN Money:  The new new gold rush

KWN:  Richard Russell – Comex gold & silver shorts in do-or-die battle

MoneyWeek:  Look what’s happening to silver

Wall St. Cheat Sheet:  Currency wars are driving gold and silver higher

Bloomberg:  Iran said to seek yen oil payments from India amid sanctions

Forex Crunch:  Report:  Gold for oil – India and Iran ditch dollar

GoldSeek/Asia Times:  Sovereigns declare war on U.S. dollar; Sheikhs fall in love with renminbi

Sharps Pixley:  Chinese gold sales in the year of the water dragon

GoldCore:  Japan gold buying on Tocom again supports

Washington Post/Zero Hedge:  IMF report: Global economy looks grim for 2012; Former IMF chief economist on Europe’s last stand

Bloomberg/Reuters: Pariahs no nore, U.S. bankers ascend at Davos; Top Justice officials linked to mortgage banks

Wall St. Cheat Sheet:  Is this the secret Wall Street fraternity that rules the world?

Economic Policy Journal:  Mitt Romney loves Goldman Sachs

Forbes:  Gingrich, the gold standard, and the Florida primary

Under the headline “Silver rally likely to experience short-lived pause,” P. Radomski emphasizes “the importance of a recent development. Silver bottomed right at the very long-term cyclical turning point and prices have moved higher since. The lack of any additional declines has clearly confirmed that the bottom is in and greatly increases the odds of a rally from here.This appears to have been a major bottom, perhaps as significant as the one seen late in 2008, which was followed by what could be described as pretty much a two and a half year rally, with prices rising more than 500% through early 2011.”

And considering both bullish and bearish scenarios in his latest “Silver Market Update,” Clive Maund points out that “after its long and brutal decline from its highs of last April, silver is washed out and oversold, with public interest in it now at a low ebb – sentiment is close to rock bottom and the COT structure is at its most positive for silver pretty much since records began, so if ever there was a time to stick your neck out, this is it.”

Related Links:  

MarketWatch:  Gold rebounds, returns to highest in five weeks

Wall St. Cheat Sheet:  Gold climbs to 5-week high, as silver remains above $30

KWN:  Egon Von Greyerz – Silver shortages & gold to accelerate higher\

Kitco:  CFTC:  Speculators mixed on gold, but buy up silver

Got Gold Report:  David Morgan tackles silver myths in video

ETF Trends/Jesse’s Café Américain:  Sprott’s physical silver ETF falls 9% after follow-on offering

WSJ:  Chinese see new year as golden

Wall St. Cheat Sheet:  Will China unleash more stimulus and boost gold prices?

GoldCore:  2012 gold estimates lowered by banks – But remain bullish

Fox Business:  Peter Grandich’s $2 million bet on gold

IB Times:  Turkey adds 63 tonnes of gold due to acceptance of metal as reserve requirement from banks

GATA:  At last Financial Times notices that central banks do shady things with gold

AP:  Ron Paul gives new life to an old issue: gold standard

The Burning Platform:  AP article about Paul’s flight expenditures debunked

The Atlantic:  World Bank to world: ‘prepare for the worst‘

Bloomberg:  IMF seeks $500B boost to lending resources

MarketWatch:  The euro-crisis horror show

The above chart is the centerpiece of a presentation by the Bullion Management Group’s Nick Barisheff, who argues that “Rising debt will lead to $10,000 gold.”  And he reminds that “it’s not just the US. Most Western economies have reached unsustainable levels of debt that will be impossible to pay off.”  This is echoed in a comprehensive report by Spiegel on “The danger debt poses to the Western world.” It estimates that world debt at the end of 2011 was $55 trillion, more than double what it was in 2000.  And according to a Bloomberg article, “Governments of the world’s leading economies have more than $7.6 trillion of debt maturing this year, with most facing a rise in borrowing costs.”