The Public Be Damned: Ted Butler

Despite the increase in margin requirements for both gold and silver yesterday afternoon, both gold and silver took off to the upside the moment that trading began in the Far East Thursday morning.

It took 'divine intervention' from New York about thirty minutes into the trading day to put an end to that. From there, it was basically down hill for the rest of the trading day, with the low coming at 2:20 p.m. in the New York Access Market.

Once the bottom was in, the price headed higher...and the day's losses were cut by thirty-five dollars. Gold only finished down $27.80 on the day. Volume was monstrous once again.

Silver made two more attempt to break through the $39.50 mark in early Thursday trading in the Far East...and the two attempts in London trading were also rebuffed.

But the silver price refused to roll over and die...and finished the electronic New York trading session down only sixty-five cents. In normal circumstances, a big drop in the gold price like we saw yesterday would have resulted in a monster drop in the silver price. But not yesterday, as every sell-off got bid right back up again...and silver closed the day down only sixty-five cents.

High frequency trading volume was lighter than usual, as only 42,000 contracts net of all roll-overs were traded.

The dollar didn't do much yesterday...and was down a hair by 5:15 p.m. in New York. As I said yesterday...gold and silver prices are now acting totally independently of the U.S. dollar.

The good folks over at ino.com have been having issues with their DXY chart for the last couple of days...so I don't have a dollar graph for you for this column.

Despite the fact that the gold price got clocked pretty good yesterday, the shares put in a stellar performance. This was certainly helped by the big rally in the general equity markets...but certainly doesn't explain the entire divergence. One has to wonder who the big buyers were...and why they were buying. What do they know that we don't? The HUI finished up 0.72%.

The silver stocks, like their golden brethren, finished mixed on the day...despite the negative bias of the silver price itself. Nick Laird's Silver Sentiment Index finished up a healthy 1.74%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that only seven gold contracts were posted for delivery on Monday. Nothing happening here.

Not surprisingly, there was a big withdrawal of gold from the GLD yesterday, as the 'hot money' fled. The ETF reported a decline of 759,559 troy ounces. That's at lot. And, surprisingly enough, there were no reported changes over at SLV.

The U.S. Mint had another sales report yesterday. They sold another 7,000 ounces of gold eagles...500 one-ounce 24K gold buffaloes...along with 215,000 silver eagles.

Month-to-date, the mint has reported sales of 55,000 ounces of gold eagles...10,500 one-ounce 24K gold buffaloes...and 1,319,000 silver eagles. August sales look like their set to blow the doors off of July sales.

Over at the Comex-approved depositories on Wednesday, they reported receiving 796,233 troy ounces of silver...and shipped 134,767 ounces out the door. The link to that action is here.

Here's a chart the Nick Laird over at sharelynx.com sent me last night. It shows the dollar value of gold coins...and dollar value of silver coins sold by the U.S. Mint over the last ten or so years.

You can see from this chart that starting just after the midpoint of 2010 the dollar value sales in both gold and silver coins were starting to converge at much higher dollar values...as more and more people rushed into silver. Since last August, the silver price has more than doubled...and it makes the convergence far more obvious.

(Click on image to enlarge)

¤ Critical Reads

Is There Enough Money on Earth to Save the Banks?: Jonathan Weil

Forget free-market fundamentals. What matters most to the capital markets now is whether the governments of the U.S. and western Europe have the will and the wherewithal to save the global financial system from disaster yet again.

A healthy climate for the efficient allocation of capital, this is not.

This op-ed piece was posted over at bloomberg.com yesterday...and is courtesy of Washington state reader S.A. No flies on Jonathan here, as he understands the situation exactly. This is very much worth the read...and the link is here.

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It's the dollar, not S&P; and all must have prizes: Chris Powell

In his day job as managing editor of the Journal Inquirer in Manchester, Connecticut...Chris knows a thing or three about writing...and when you buy your ink by the barrel, you get to write about what you want...and when you want to.

"Standard & Poor's is catching hell for cutting the credit rating of the U.S. government and threatening to cut the credit rating of other governments. People are blaming the agency for the stock market declines that have followed all over the world. With Italy's penchant for comic opera, prosecutors in Milan have even raided S&P's office there in pursuit of evidence for a "charge" of unfairly criticizing the country's financial system.

"Yes, S&P long awarded spotless credit ratings to what were essentially frauds, so the agency's credibility is less "standard" than "poor." But the company's mistakes are no rationale for continuing them.

Mr. Powell's editorial in yesterday's edition falls into the must read category...and the link is here.

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France bans shorters as markets bounce back

France, Italy, Spain and Belgium have resorted to the desperate measure of banning short-selling of banking stocks in the wake of this week’s market chaos.

France has been under particular pressure after rumours swirled that one of its leading banks, Société Générale, was in crisis. The bank was forced to deny it was in trouble after its shares tumbled 20pc.

The ban came into effect yesterday morning...and will last 15 days.

This story was posted in yesterday's edition of The Telegraph...and I thank Roy Stephens for sending it along. The link is here.

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Desperate Swiss eye euro peg to repel safe-haven flood

The Swiss franc retreated against the euro in a wild one-day move on Thursday after top officials at the Swiss National Bank (SNB) floated ideas for a temporary euro peg, a once-unthinkable move.

"Nothing is excluded," said Jean-Pierre Danthine, a SNB board member. "The situation is extremely complex and difficult. There is no magic wand."

The Swiss franc has moved with gold over recent weeks, acting as a magnet for capital flight from the discredited debt currencies of the West. The SNB said the franc is "massively overvalued" and has moved into dangerous territory over the past month.

And when the Swiss franc is closed as a safe haven amid the worldwide storm of currency devaluation, what's left as a safe haven but gold?

This Ambrose Evans-Pritchard story showed up in a GATA release yesterday...and it's a must read. The link is here.

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Gold shares responding (finally)?

Here's excellent commentary on gold and gold shares by marketwatch.com metal commentator, Peter Brimelow. I had the pleasure of meeting his twin brother, John, at the GATA conference in London last weekend.

This is a must read from one end to the other...and the story is linked here. I thank Florida reader Donna Badach for sharing it with us.

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Gold Stock Valuations Implode as Gold Rises

Here's another story about gold equities vs. the metal itself. This one was posted over at resourceinvestor.com on Monday.

The last time that general equities were this cheap relative to gold or silver was 1991 and 1987 respectively. Unfortunately, it’s not merely confined to general equities.

Precious metal miners have also plunged to very low valuation levels in recent weeks as they have treaded water even whilst metals prices have been on a tear, and money has been sluicing into exchange traded funds at an unprecedented rate. A basket of senior gold stocks has seen intraday multiples crash to ranges we last saw in the aftermath of the Lehman bankruptcy.

This story is also worth your time...and I thank reader U.D. for sending it along. The link is here.

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Vietnam's Gold price falls as supply is to be replenished soon

As Peter Brimelow mentioned in his marketwatch.com story above, the Vietnamese public responded this week by driving local gold to premiums so high that the gold-hating authorities relaxed their ban and allowed the legal importation of some gold.

Here's a story about that posted over at vietnambusiness.asia. It's unfortunate that the person who translated this story into English is not overly fluent in the technical jargon of the local gold market...and lot of the meaning is lost.

But it's a positive gold story nonetheless...and it's worth picking your way through it. I thank reader David Ball for digging this piece up...and the link is here.

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40 years after gold standard ended, bugs crow

Here's a Reuters piece that I ripped out of a GATA release yesterday evening.

Monday will mark the 40th anniversary of the United States' abandonment of the gold standard. But gold bugs kept the faith -- even when prices stayed under $500 for nearly 25 years after their 1981 peak.

Gold bugs, often accused of sensationalism, are finding their passion is becoming mainstream. "Raging" is probably no longer a suitable description of them. "Irresistible" is increasingly nearer the mark.

This is another must read story...and the link is here. The picture of one-tael gold cubes [about 1.13 ounces, or 38 grams] imbedded in the story is worth the trip all by itself.

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The Public be damned: Ted Butler

It isn't often that silver analyst Ted Butler has something posted in the clear. But an excerpt of Wednesday's commentary to his subscribers is one that made the trip. I quoted a paragraph out of it in my Thursday column, so now you can read a lot more of what he had to say.

I urge you to take ten minutes of your time and e-mail the five CFTC criminals listed at the bottom of this short piece and voice your concerns about the ongoing price management scheme in the silver and gold markets. They don't deserve your respect, but you should be polite anyway. This short must read piece is posted over at silverseek.com...and the link is here.

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The issue which has swept down the centuries and which will have to be fought sooner or later, is the people versus the banks. - Lord Acton

Thursday's gold volume was a very heavy 370,000 contracts net of what few roll-overs there were....and the preliminary open interest number showed a surprising increase of 11,643 contracts, which I must admit I wasn't expecting, considering the price action, as there was considerable long liquidation. let's hope that the final o.i. number shows a big improvement when it's posted later this a.m.

Wednesday's final open interest number showed an increase of 10,914 contracts...which is a decline of about 12,000 contracts from the preliminary o.i. number. As I mentioned in yesterday's column, I was kind of hoping that it would all disappear when the final number was posted...but it didn't.

Silver's net volume on Thursday was only 42,000 contracts...which is the smallest volume number we've seen all week. The preliminary open interest number also showed a big increase of 3,570 contracts...and I must admit I don't know what to make of that.

I was expecting that Wednesday's final open interest number would show a decline...and it did...down 2,034 contracts. Too bad that number won't be in today's Commitment of Traders Report.

Wednesday afternoon's announced increase in gold margins by the CME should not have been a surprise to anyone, as it was a perfectly natural reaction to a sharply rising price of any commodity...and the CME [for a change] acted responsibly in light of that. It wasn't like the multiple margin increases in silver on during the first week of May as the as the silver price was declining after the 'drive-by shooting' on Sunday, May 1st. It will be interesting to see what the CME does from hereon in as the gold price continues to rise.

Gold and silver are still horribly overbought...and both the 50 and 200-day moving averages are so far out of sight below, that a drop of $200 wouldn't surprise me in the slightest, as I could explain that easily. But can the bullion banks engineer that big a price decline...or any kind of price decline? Time will tell. Here's the 6-month gold chart.

(Click on image to enlarge)

I could also logically explain a $200 rise in the price of gold as well. As Ted Butler has said quite a few times, we will get to the point where the Commitment of Traders report won't matter...and we could be at that point now. We will just have to watch and wait to see how this all turns out. But as I've already mentioned a few times this week, the time line that the bullion banks have left to engineer any sort of price decline is getting perilously short...as the beginning of the high demand part of the year for precious metals is only weeks away...and we're already at record-high prices in gold.

There's a Chinese saying that goes something like this..."May you live in interesting times." It certainly is all of that...and the price action for the rest of this month could be an education.

Not much happened in the thinly-traded Far East market earlier today...and now that London is open for business, there's not much happening there, either. Gold is down about six bucks and silver is unchanged as of 5:14 a.m. Eastern time.

I hope your weekend goes well...and I'll see you here on Saturday.