News and Views

August 12, 2010

Bullion Banks in Retreat?

Analyzing “U.S. banks positioning in COMEX futures,” Got Gold Report‘s Gene Arensberg concludes that “the largest of the largest commercial ‘hedgers’ and short sellers for gold and silver, the big, reporting U.S. bullion banks, like JP Morgan Chase and HSBC, have opted to reduce their net short positioning for both precious metals recently.” In Bank Participation Reports from June to August, the drop is about 28% in gold, and going back to December 2009, “the biggest of the Big Sellers of silver futures have reduced their net short exposure for silver by 16,843 contracts or a whopping 39%,” with about 8,000 shed since May. Related Links: Reuters:  CFTC to withdraw rule then repropose curbs The Street:  Gold prices volatile, settle higher Mineweb:  Gold’s upward path will be volatile but direction and magnitude are assured Zero Hedge:  Goldman goes goo-goo for gold Silver Investing News:  Silver prices and a silver minerContinue Reading
August 11, 2010

The Empire Strikes Out

“This economy is probably headed down for years,” says The Daily Reckoning‘s Bill Bonner, in a wide-ranging interview with The Daily Bell, in which he calls the euro “more solid than the dollar,” and predicts that the latter “won’t last for another 10 years” as a paper money standard. He also suggests that the Chinese economy may be “doomed to a crash,” and believes that if deleveraging “is calm and orderly as it was in Japan during that country’s ‘Lost Decade,’ then we will probably see somewhat lower gold and silver prices, at least for some time. Of course, it could become disorderly, which would be messy.” And he thinks Obama “seems like a nice enough guy” who’s “totally out of his depth. Would somebody else be better? I doubt it. I think it’s kind of a hopeless situation. This is not politics, anymore; this is economics. He doesn’t knowContinue Reading
With Gold Scents sensing that “something big is brewing under the surface in silver,” Ted Butler, in an interview with Investment Rarities’ Jim Cook, advocates switching from gold to silver. “Do you know how much egg you will have on your face if gold goes up and silver doesn’t?,” asks Cook.  “I don’t worry about that,” says Butler. “Do I have egg on my face for informing the world that silver was manipulated, or rarer than gold, or that JPMorgan was the big silver short?”  He goes on to predict that “they will be writing about the coming price events in silver for centuries.  If you don’t have silver but you own gold a switch makes a lot of sense to me.” Related Links: Jesse’s Café Américain:  Why the official antipathy to gold and silver? James Turk:  Is silver ready to move higher? Kitco:  Speculators hike silver long positions considerablyContinue Reading
Click to enlarge the above graph that illustrates the concentration of short contracts from the latest COT report for the four and eight largest traders, vs. the days of world production to cover those contracts. The number of days for silver and gold is about 90 to 165, compared to only 30 to 50 for the next closest commodities. Ed Steer explains that “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?” He describes a similar situation in gold, “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 banksContinue Reading
August 7, 2010

How Low Can They Go?

Following a week in which silver and gold rose 2.6% and 1.8% respectively, Ted Butler says that what stood out in August’s Bank Participation Report, released Friday, was that the big U.S. bullion banks, in essence JPMorgan, are covering their short positions,” which are now at their lowest “since May of ’09 in COMEX silver futures, about 26,000 contracts net, and that’s down about 8,000 contracts” from May. See the reports for August and May of this year, under CMX Silver – Short Futures. He contends that it has “broken ranks to a certain extent with the other commercials,” and “my premise would be that going forward, it’s very unlikely that JPMorgan would increase their short position if they’ve been given the word to close out.” Butler does however speak of a “deterioration in silver” by almost 6,000 contracts in the latest COT report, with commercial selling coming “mostly fromContinue Reading
August 6, 2010

Peak Gold?

After Barrick Gold Corp.’ founder Peter Munk told Reuters that “What most large companies do now, they look for mixed-metal mines, where gold is a part of other metals and other minerals,” Jeffrey Lewis, in a Commodity Online article, suggested that the concept of peak oil could extend to gold: “While there is still plenty of gold and silver to be found, the simple fact that these mixed metal mines are even on the radar indicates that the days of rampant production are over, and mines are being forced to look for smaller and smaller deposits of multiple types of metals to remain consistent in their growth rates. All in all, the supply of gold and silver in the ground is becoming freakishly low.” And Marketwatch columnist Paul Farrell weighs in on Business Week‘s recent cover story that called commodity ETFs “America’s worst investment.” “Worst? Add toxic, deadly, evil. CommodityContinue Reading
August 5, 2010

From Q2 to QE

About the World Gold Council’s just-released 2nd quarter digest,  Zero Hedge sees that “A modest bout of profit taking in gold, in big part driven by hedge fund liquidations at the end of Q2, has pushed the spot price by less than 7% from the all-time high, and a variety of bears have crawled out of the woodwork screaming the end of the gold bull market. In the grand scheme of things this is rather myopic. It was precisely the same quantitative easing that provided the impetus for gold’s straight line rise from just over $800 to $1270 in the span of a year … that will serve as the springboard for the next major move higher: and with the Fed now days away from announcing some iteration of its brand new monetization scheme, the days where gold can be purchased cheap may be ending.” Related Links: Casey Research:  GoldContinue Reading
“What are the facts?,” asks Investment Rarities’ Jim Cook. “I’ve put such a large percentage of my assets into silver that it’s a cause for worry.  Not so much because I think it might go down, but will it go up to the extent I anticipate?  I’m looking for something really big, but will it happen?  I reassure myself that it will by frequently reciting the facts.” And in a Numismaster article, Patrick Heller describes what he sees as “strange developments with COMEX gold inventories,” which he likens to “a run on COMEX silver inventories since June 16.” Related Links: Bloomberg:  China to further open gold market to trading, imports Mineweb:  The gold market is shifting eastwards? iStockAnalyst:  China’s silver bull market Coin News:  July 2010 U.S. Mint Silver Eagle sales: Top 10 month, best July ever Coin Update News:  July 2010 U.S. Mint:  One ounce Gold Eagles in demandContinue Reading
August 3, 2010

Asia Is Golden

An Ipsos survey of some 18,000 investors in 24 countries, purporting to take “The Economic Pulse of the World,” asked respondents about their intention to purchase gold.  Reuters reports that 25 percent “said they were ‘somewhat or very likely’ to invest in gold as a security or physical metal as opposed to jewelry in the next six months…. Among investors who said they would buy gold in the next six months, 47 percent said they would invest gold to protect their wealth, and 53 percent said they intended to profit from gold investments.” About three-quarters of the respondents in India and Indonesia, and more than half of those in China said they could invest in gold, compared to 11 percent in North America and 7 percent in Europe. Additional Links: Traders Narrative:  Technicals & sentiment suggest gold’s correction over Golden Truth:  Gold/silver charts looking rodeo – Dollar chart looking purgatorial…Continue Reading
In a wide-ranging analysis of the economic, investment and political landscapes, Tocqueville Gold Fund manager John Hathaway recalls that “Eleven years ago, the cover of Time magazine featured Alan Greenspan, Robert Rubin, and Lawrence Summers posing heroically over the headline: ‘The Committee to Save the World.’ The sidebar was:  ‘The inside story of how the Three Marketeers have prevented a global meltdown—so far.’ The reverent tone of the 2/15/99 article strikes a note of discord in the sour investment climate of today.” Much of Hathaway’s focus is on how gold fares in this climate and beyond:  “Against a backdrop of wilting confidence in financial assets, gold is under owned by central banks, institutions, and individuals.  One must distinguish between a near term overbought condition, to which any investment class in a secular bull market can become prone, versus a full scale mania.  We are a long way from silly seasonContinue Reading
Following a bad month that ended with three straight up days for both silver and gold, Ted Butler tells King World News that he thinks “we’ve probably seen the bottoms on each of them,” citing what he calls “the best readings we’ve had in the Commitment or Traders in many, many months.” Butler says he saw what “was really a stand out this week in the COT, especially in silver,” with JPMorgan covering some 3,400 short contracts. He adds that over the last four weeks, “we’ve gone down in the total commercial short position in silver by about 12,000 contracts,” and “JPMorgan looks like they accounted for 10,000 of the 12,000, so they are covering like crazy in the silver market.” Which he thinks “portends a real sea change.  I think finally, maybe the new law, maybe they got somebody breathing down their neck … but it looks like JPMorganContinue Reading
July 30, 2010

Out of Bondage?

Expected Returns’ Moses Kim has “been preparing for the gold rocket launch for many months now.  I am probably different from most people in that I focus more on the likely flow of capital than inflation when trying to figure out gold price movements. What I foresee is a flood of capital going from bonds into gold.” Calling U.S. government bonds “the biggest bubble I’ve seen in my life,”  he concludes that “The bond market is so huge that even a small percentage of capital flowing from bonds to gold will result in a volcanic eruption of epic proportions. So the potential rocket launch in gold depends largely on the bond market.” While a Seeking Alpha post asks, “Is there a bond bubble underway,” Credit Writedowns’ Edward Harrison notes that “David Rosenberg is bullish on bonds.  And the reasoning for his bullishness has a lot to do with the deleveragingContinue Reading