News and Views

In his weekly metals wrap interview, Ted Butler said of the COT report, that gold added some 11,000 contracts in the dealer short position, only about a third of what he expected.  And silver actually improved, in that it was reduced by about 2,800 short contracts, with “a massive decrease in the big four — read JPMorgan’s — short position,” of about 6,800 contracts, leaving those four with their biggest net short position in one year. Butler also says that an increase in additions to the GLD and SLV, with the former adding almost 2.5 million ounces, or roughly $3 billion in the last three weeks, speaks to “a very strong physical demand in both gold and silver,” and “U.S. Mint sales are still blistering hot in both gold and silver.” And he notes that the CFTC has posted the public comments to its March 25th hearing, with 95 percentContinue Reading
As gold prices rise without support of the U.S. dollar, which is at its highest level since April 2009,  Przemyslaw Radomski, charting gold and the dollar, sees indications “that the USD has reached a local top, which — along with the fact that gold was able to rise even along with higher USD values — is a positive factor for the precious metals market.” Bullion Bulls Canada‘s Jeff Nielson argues that “the U.S. dollar has gone from being (literally) ‘as good as gold’ (when it could be converted into such) to just another ‘tulip’. Like the tulip bulb, it has no intrinsic or aesthetic value of any kind and it can be produced in infinite quantities.” And an article characterizing that dollar as “The World’s Tallest Midget,” begins by asking:  “Does anybody find it alarming that the current death spiral in European debt and currency is at the hands ofContinue Reading
As Business Insider ranks the 15 countries “Making a Fortune on the Surge in Gold,” it’s argued that gold and silver are “The Only Game in Town 2010-2011,” and a post on Zero Hedge expresses the belief that “gold is going to make a multi-month push to test $1,500 dollars. Then it is time to reevaluate. If the printing presses are still running, I will hold my position. Given the tendency of humans to ‘paper over‘ problems, this is the most likely scenario.” Related: Coin Update:  Gold price sets all-time high, silver reaches 26-month high Kitco News:  Silver rides gold’s rally, could attract more buying interest MarketWatch:  In markets tug-of-war, gold holds the key Wall Street Journal:  New York gold settles at record: Where to from here? Christian Science Monitor:  Gold price hits record as investors shy away from euro Zero Hedge:  First gold, now Europe running out of silverContinue Reading
May 12, 2010

Can the Bears Defend?

As silver surged on Tuesday (along with gold), Got Gold Report‘s Gene Arensberg wrote that “We think $19.50 is a level that the silver bears must defend at all costs.  If that gives way, the next stop is likely much higher,” noting that “with the largest seller in the COMEX futures market under a DoJ and CFTC microscope, they just might not be as frisky as they might otherwise be.” And on the release of the CPM Group’s Silver Yearbook 2010, Reuters quoted managing director Jeffrey Christian as saying that “Investors are looking at silver and saying: It’s a good buy because I can buy it as a safe haven like gold, and if the economy does get better, it’s an industrial play.” Or, as David Morgan characterized it in a recent interview, ‘Silver is bullish on its bipolar character.’Continue Reading
May 11, 2010

Got Gold?

An inquiry into “Gold Shortage Rumors” quotes James Turk as saying: “I have seen these stories and do not have any inside knowledge about their accuracy. I do believe, however, that many bullion banks and bullion trading houses operate on a fractional reserve basis, meaning that they do not have enough physical metal on hand to meet all of their obligations to deliver physical metal. Basically, if you own paper gold from a bank or bullion house, instead of real, physical metal in hand or in secure storage … you are dependent upon the bank’s creditworthiness. I don’t recommend being in that position.” Turk recently questioned the IMF’s gold holdings, and Lew Rockwell asked Rep. Ron Paul if he thought there was any gold in Fort Knox. And an article examining the degree to which gold has become a new reserve currency, asks:  “So what is going to happen whenContinue Reading
Endorsing Dylan Ratigan’s take on the “Flash Crash,” Zero Hedge also recommends that “retail investors who think this market is anything but a two-tiered playground built now exclusively for Wall Street to fleece you every single day, our advice is to get the hell out. Everyone else already is… Except of course for the banks and the various 3-3,000 man quant operations, which are the only market participants left.” The high-frequency trading practiced by those quants, which is increasingly expanding into commodities, has been under fire in the wake of last Thursday’s meltdown: New York Times:  Computer Trades are Focus in Wall Street Plunge “Ever since computerized trading became a dominant force in the nation’s stock markets in recent years, market experts have been warning that the lack of consistent rules among exchanges and the increasing complexity and speed of computer trading systems could destabilize markets.” The Big Picture:  BlameContinue Reading
The New York Post reports: “Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market… The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said. The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice’s Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.” More: “The probes are far-ranging, with federal officials looking into JPMorgan’s precious metals trades on the London Bullion Market Association’s (LBMA) exchange, which is a physical delivery market, and the New York Mercantile Exchange (Nymex) for future paper derivative trades. JPMorgan increased its silver derivative holdings by $6.76 billion, or about 220 million ounces, during the last threeContinue Reading
In his weekly metals wrap interview, Ted Butler says that over the last couple of weeks “the big four shorts,” read JPMorgan, increased their short position to the highest level in three months, according to the May Bank Participation Report. And while that likely paved the way for silver getting “walloped” early in the week, the cleaning out of those short positions may have accounted for Friday’s rally. Were their also other factors at play? He also addresses the positive money flow into the gold and silver ETFs, with an increase of about 3 million ounces in the SLV this week, following the withdrawal of 18 million ounces in prior weeks, showing that “On this big sell-off, there was no physical selling of silver… any selling of silver that drove the price down was strictly of the paper variety on the COMEX.” And he calls it “just phenomenal” that moreContinue Reading
May 7, 2010

Gaining Currency

After gold passed the $1,200 mark on Thursday, in a segment on CNBC‘s “Kudlow Report,” UC Irvine business professor Peter Navarro said, “this is not a Greece story, this is an end of the Euro as a reserve currency story. Enter stage right, gold.” He added that “Gold is going to be the de facto world reserve currency over the next twenty years because the dollar over time is going to be under pressure from all the debt we’ve incurred, and the yuan in China is not going to have the heft in order to carry that. That’s why people are moving to gold, even as you see other inflation hedges like commodities and oil going down.” And Infectious Greed‘s Paul Kedrosky advances this “outlier scenario….my guess is that we will sometime soon see a call for a first-world debt conference — and leading the calls, of course, will beContinue Reading
May 6, 2010

The Gold Wars

A Motley Fool blogger explains the gold war between “insiders (Jeffrey Christian of CPM Group, a metals consultancy), and those on the outside, GATA.”  He points to their latest skirmish and offers this opinion:  “My view is that it’s shocking that insiders like Christian cannot comprehend the difference between gold and paper.  I can sort of see how he might support the fractional banking system because it is so ingrained in our society, but how he justifies a fractional gold system is beyond me.” That battle is being played out as part of a larger conflict summarized in an article on Mineweb, headlined “China – the Gorilla in the 3rd gold war,” which is based on an analysis in Paul Mylchreest’s Thunder Road Report:  “So how is the ‘war’ being fought covertly – on the one side by keeping the market off-balance avers Mylchreest.  Intervention to prevent sharp upwards priceContinue Reading
In the first of a three-part series on “The Silver Price Spiral,” Bullion Bulls Canada‘s Jeff Nielson argues that “supply/demand fundamentals make it inevitable that silver will rise to a triple-digit price – almost certainly within this decade…The interesting question becomes: what will be the first digit of that number?“ In part two he examines the SLV, and concludes that it’s “nothing but paper-piled-on-paper.” And in part three he makes the case for silver having “perhaps the most-bullish demand fundamentals of any commodity in history.” More on Physicals vs. Paper:  “While the paper metals market continues to explode in value, the physicals market is shrinking, as silver is consumed in the production of electronics.” And in an interview with Hard Assets Investor, the CEO of a British precious and base metals consultancy speaks about new applications for silver, particularly the use of silver as a biocide.Continue Reading
After Bill Clinton last week detailed the down side of the U.S. going off the gold standard, which he nonetheless said “was necessary for economic management purposes,” an article posted on Commodity Online argues that the U.S. should return to the gold standard, since “Disconnecting the U.S. dollar from gold was effectively disconnecting Wall Street from Main Street.” James Grant, who himself has mourned the loss of the gold standard, also addressed that disconnect in a Washington Post op-ed, arguing “How much better it would be if the bankers took the losses just as they do the profits.” His Grant’s Interest Rate Observer recently reported that bank lending in the U.S. continued to contract over the last three, six and 12-month periods, a situation that is basically unchanged, according to a Federal Reserve survey released Monday, which also found that “loan demand generally weakened further.” And that might be explainedContinue Reading