July 27th, 2013
Silver closed higher on the week, up more than 10% for the month. But yesterday’s access close at $19.99, combined with the Dow’s hail mary, which put the index in the green must rank as one of the most egregious examples of management of perception at work.
The last thing that “the powers that be” want to see is “red” going into the weekend. And just for good measure, silver closes right under it’s support at $20.
All in all, it wasn’t a bad week considering it was options expiration.
While the technical picture is a fabricated affair, making “painting the tape” a work of fine art, my sense is that we will more than likely test the recent lows before resuming the long term upward trend.
It’s the just the way the game works.
The idea is to shake out more weak longs and deliver another blast at sentiment.
We still have surging retail demand and lots of money out there looking or yield in all the wrong places.
Certainly, new observers have noticed silver’s 10% recent return after a 60% decline.
Another test of $18 would frighten away these new would be longs and those dipping into the ETF’s.
The COT structure actually deteriorated (new commercial shorts), indicating that the big guys are not completely gone.
Go forward rates for gold are still negative, but not significant in my opinion.
COMEX inventories for gold continue to decline, stirring up huge emotion in the analyst community, yet the key which is in and out movement has not changed much.
Taking a step back from the precious metals, we’ve had lots sea change and revelation in the commodity warehouse space.
The “big story” broke last Sunday in the New York times, just before the congressional hearing that took place on Tuesday.
A Shuffle of Aluminum, but to Banks, Pure Gold
MOUNT CLEMENS, Mich. — Hundreds of millions of times a day, thirsty Americans open a can of soda, beer or juice. And every time they do it, they pay a fraction of a penny more because of a shrewd maneuver by Goldman Sachs and other financial players that ultimately costs consumers billions of dollars.
Unfortunately, I am kind of immune at this point.
Yes it’s outrageous. (Ill bet the story lasts maybe another day or two in the news cycle).
But it’s just one more symptom of an overall disease – where power and wealth are way too concentrated.
The aluminum warehousing issue was pointed out at least two years ago by the fringe bloggers.
Cynically speaking…the main reason it made into NY Times and for the senate (clown) hearing this week is because the Coors/Miller lobby is big enough to matter.
The main players in silver, however….the Silver Users Association – “love” and have actually supported/promoted lower silver prices for years. They were the driving force behind the government dumping of its stockpile of silver throughout the seventies and eighties. They probably maintain that influence today.
I know I’m preaching to the choir, but for whatever reason, most people are “fine” with Libor, oil, equities, bonds, along with just about every government data point being total fantasy, but they are shocked, shocked! and insist that gold and silver are on the straight and narrow and cannot be manipulated – except maybe by some “crazy” Texans.
My guess is that its a political thing.
Gold and silver “bugs” are representative of a group that are perceived as being so far right they we are almost left. ??
It is interesting that at least JPM is exiting commodities, (18% of last years overall corp profit) – but they probably got a tap on the shoulder some place.
Sadly, these are not banks doing real banking.
My guess for prices going forward is back to testing lows in this upcoming week of major economic data:
It Is Happening Again: 18 Similarities Between The Last Financial Crisis And Today
If our leaders could have recognized the signs ahead of time, do you think that they could have prevented the financial crisis of 2008? That is a very timely question, because so many of the warning signs that we saw just before and during the last financial crisis are popping up again. Many of the things that are happening right now in the stock market, the bond market, the real estate market and in the overall economic data are eerily similar to what we witnessed back in 2008 and 2009. It is almost as if we are being forced to watch some kind of a perverse replay of previous events, only this time our economy and our financial system are much weaker than they were the last time around. So will we be able to handle a financial crash as bad as we experienced back in 2008? What if it is even worse this time?
#1 According to the Bank of America Merrill Lynch equity strategy team, their big institutional clients are selling stock at a rate not seen “since 2008“.
#2 In 2008, stock prices had wildly diverged from where the economic fundamentals said that they should be. Now it has happened again.
#3 In early 2008, the average price of a gallon of gasoline rose substantially. It is starting to happen again. And remember, whenever the average price of a gallon of gasoline in the U.S. has risen above $3.80 during the past three years, a stock market decline has always followed.
#4 New home prices just experienced their largest two month drop since Lehman Brothers collapsed.
#5 During the last financial crisis, the mortgage delinquency rate rose dramatically. It is starting to happen again.
#6 Prior to the financial crisis of 2008, there was a spike in the number of adjustable rate mortgages. It is happening again.
#7 Just before the last financial crisis, unemployment claims started skyrocketing. Well, initial claims for unemployment benefits are rising again. Once we hit the 400,000 level, we will officially be in the danger zone.
#8 Continuing claims for unemployment benefits just spiked to the highest level since early 2009.
#9 The yield on 10 year Treasuries is now up to 2.60 percent. We also saw the yield on 10 year U.S. Treasuries rise significantly during the first half of 2008.
#10 According to Zero Hedge, “whenever the annual change in core capex, also known as Non-Defense Capital Goods excluding Aircraft shipments goes negative, the US has traditionally entered a recession”. Guess what? It is rapidly heading toward negative territory again.
#11 Average hourly compensation in the United States experienced its largest drop since 2009 during the first quarter of 2013.
#12 In the month of June, spending at restaurants fell by the most that we have seen since February 2008.
#13 Just before the last financial crisis, corporate earnings were very disappointing. Now it is happening again.
#14 Margin debt spiked just before the dot.com bubble burst, it spiked just before the financial crash of 2008, and now it is spiking again.
#15 During 2008, the price of gold fell substantially. Now it is happening again.
#16 Global business confidence is now the lowest that it has been since the last recession.
#17 Back in 2008, the U.S. national debt was rapidly rising to unsustainable levels. We are in much, much worse shape today.
#18 Prior to the last financial crisis, Federal Reserve Chairman Ben Bernanke assured the American people that home prices would not decline and that there would not be a recession. We all know what happened. Now he is once again promising that everything is going to be just fine.
WORLD
Hundreds Killed In Overnight Cairo “Massacre” As 30 Million Take To The Streets
Nearly a month after the Egyptian military coup (that wasn’t a coup according to the US), the celebrations over the democratic overthrow of the Muslim Brotherhood’s president Morsi (according to John Kerry) continue with hundreds of protesters killed and injured in the latest overnight violent breakout.
Euro Area Government Debt Rises To New Record High
While the European economy may be moving in a straight line from upper left to lower right, the same can not be said for the level of debt in Europe, which has taken on the inverse trajectory. As per the just released quarterly update of Euro area government debt, in Q1 2013, total government debt in Europe as a % of GDP just hit a new all time high of 92.2%. This compares to 90.6% in the previous quarter, and up from 88.2% in Q1 2012.
OECD publishes plan to cut tax evasion
This is more likely to flag up inappropriate behavior than the longer established practice of one tax authority starting an investigation into suspicions of wrongdoing, and then making a request for data.
German Intelligence Worked Closely with NSA on Data Surveillance
It was a busy two days for the surveillance specialists of the Bundesnachrichtendienst (BND), Germany’s foreign intelligence agency. At the end of April, a team of 12 senior BND officials flew to the United States, where they visited the heart of the global American surveillance empire: the National Security Agency (NSA). The purpose of their mission can be read in a “top secret” NSA document which SPIEGEL has seen — one of the trove of files in the possession of whistleblower Edward Snowden.
Attacks in Egypt lift death toll amid turmoil – Middle East – Al Jazeera English
Unknown gunmen who shot at supporters of the deposed Egyptian president Mohamed Morsi have killed at least two people, witnesses and health officials confirmed.
One-Third Of Europe’s Unemployed Are Spanish
With yet another promise about to go up in smoke (that of PM Rajoy’s claim that Spain will be out of recession this quarter), we thought it worth a brief reflection on just what a disaster the nation is and how much it is weighing on the entire EU. Spain has been in recession for seven quarters in a row and survey indicators suggest it will extend to eight.
Spanish Pension Raids Spell Bad News for Bond Sales: Euro Credit
Spain’s Treasury may find one of its best customers less eager to buy its bonds as budget woes lead Prime Minister Mariano Rajoy to raid a government piggy-bank fora second year.
Economic Crisis in Italy Continues to Worsen
The euphoria was evident. “We’ve done it!” Italian Prime Minister Enrico Letta tweeted earlier this month after the European Commission had provided his country with new financial leeway.
Edward Snowden Is Now Free To Leave The Airport And Enter Russia
Former NSA whistleblower/leaker Edward Snowden has been granted documents that will allow him to leave a Moscow airport where he has been for the last month, Reuters and Russian media report.
China Orders Ban on New Government Buildings
HONG KONG — China issued a directive on Tuesday banning the construction of government buildings for the next five years, the latest in a series of initiatives by President Xi Jinping to discourage corruption and foster frugality at a time of broad popular resentment against high-living bureaucrats.
Iceland proposal to write off debt triggers S&P outlook downgrade
Rating agency Standard & Poor’s yesterday added its voice to a chorus of warnings against a pledge by Iceland’s new government to write off as much as 20 per cent of all its citizens’ mortgage debt, announcing that it had revised downwards its outlook for the country from stable to negative.
Banks shiver as UBS swallows $885 million U.S. fine
European and U.S. lenders such as Credit Suisse and Deutsche Bank have set aside money to cover the cost of any losses arising from the dispute with the Federal Housing Finance Agency but estimates vary widely.
DOMESTIC
CFTC Orders Panther Energy Trading LLC and its Principal Michael J. Coscia to Pay $2.8 Million and Bans Them from Trading for One Year, for Spoofing in Numerous Commodity Futures Contracts
Washington DC – The U.S. Commodity Futures Trading Commission (CFTC) issued an Order today filing and simultaneously settling charges against Panther Energy Trading LLC of Red Bank, New Jersey, and Michael J. Coscia of Rumson, New Jersey, for engaging in the disruptive practice of “spoofing” by utilizing a computer algorithm that was designed to illegally place and quickly cancel bids and offers in futures contracts.
Senate Scrutiny of Potential Risk in Markets for Commodities
WASHINGTON — Wall Street’s lucrative commodities businesses came to the fore here Tuesday as a Senate panel questioned whether banks should be allowed to control warehouses, pipelines and other infrastructure used to store and transport essential goods.
2 JPMorgan Directors Resign
Two directors at JPMorgan Chase who received lackluster support from shareholders at the bank’s annual meeting in May resigned on Friday.
‘Neighbor vs. neighbor’ in US cities, Whitney says
The financial advisor and analyst said the financial woes facing bankrupt Detroit will become common around the country as local governments do whatever they can to escape onerous debt burdens.
Amash amendment to curb NSA surveillance narrowly defeated
WASHINGTON—House lawmakers on Wednesday defeated an attempt to drastically curb a national-security program that collects the phone records of millions of Americans, after a tense debate on the balance between privacy rights and government efforts to find terrorists.
TARP Audit: Housing Recipients Re-Defaulting in Alarming Numbers
Nearly one-third of the homeowners who got help through the government’s main foreclosure prevention program are defaulting again on their mortgages, according to a government watchdog’s report.
U.S. files criminal fraud charges against SAC Capital
CARLO ALLEGRI/REUTERS – People walk past a building that includes SAC Capital as a tenant in New York on July 25, 2013. Federal prosecutors filed criminal charges against the hedge fund, citing “institutional practices” that allowed for several employees to engage in insider-trading.
Feds tell Web firms to turn over user account passwords
The U.S. government has demanded that major Internet companies divulge users’ stored passwords, according to two industry sources familiar with these orders, which represent an escalation in surveillance techniques that has not previously been disclosed.
Pentagon to deploy huge blimps over Washington, DC for 360-degree surveillance
Once above the nation’s capital, JLENS will allow the Army to see for 320 miles in any direction from 10,000 feet above the earth. The system can be set up to operate on its own for an entire month without requiring refueling, and offers the Pentagon surveillance capabilities that dwarf other options at a penny of the cost.
Obama, Republicans gear up for bruising U.S. budget fight
While Capitol Hill analysts are not predicting catastrophe, they have several reasons to worry that the conflict just weeks away could be even worse than usual.
INFLATION
Bernanke Seen Slowing QE to $65 Billion in September
Federal Reserve Chairman Ben S. Bernanke in September will trim the Fed’s monthly bond buying to $65 billion from the current pace of $85 billion, according to a growing number of economists surveyed by Bloomberg News.
Treasuries Not Safe Enough as Foreign Purchase Pace Slows – Bloomberg
Foreign investors, the bulwark ofthe U.S. government bond market as it more than doubled in sizeduring the financial crisis, are adding Treasuries at theslowest pace since 2006 amid the worst rout in four years.
U.S. House Prices Climbed 7.3% in Year Through May – Bloomberg
U.S. house prices rose 7.3 percentin the year through May as buyers competed for a small supply oflistings, according to the Federal Housing Finance Agency.
Prices Fuel Outrage in Brazil, Home of the $30 Cheese Pizza
SÃO PAULO, Brazil — Shoppers here with a notion of what items cost abroad need to brace themselves when buying a Samsung Galaxy S4 phone: the same model that costs $615 in the United States is nearly double that in Brazil. An even bigger shock awaits parents needing a crib: the cheapest one at Tok & Stok costs over $440, more than six times the price of a similarly made item at Ikea in the United States.
Fed Chief Race Down To Two
The White House whittled down its candidates to succeed Federal Reserve Chairman Ben Bernanke to two names: Current Fed Vice-Chair Janet Yellen and long-time Washington, D.C., economic guru Larry Summers.
Japan Prices Rise Most Since ’08 in Boost for Abe
Consumer prices excluding fresh food increased 0.4 percentin June from a year earlier, the statistics bureau said in astatement today. The median estimate of 29 economists was for a0.3 percent gain, a Bloomberg News survey showed. Excludingenergy as well, prices dropped 0.2 percent, continuing more thanfour years of declines.
US blows out $16.7 trillion debt limit
The US Treasury has already exceeded the federal legal borrowing limit of $16.7 trillion in May. That signals the main structural problems remain unresolved putting at risk the fragile recovery.
PRECIOUS METALS
RBI move helps push gold to 1-month high in India
India’s apex bank, the Reserve Bank of India’s regulations on gold imports have come as a major surprise to market players. Gold jewellery is set to become expensive with the RBI making it mandatory to export 20% of all imported gold in the form of ornaments. Gold in the domestic market hit a one-month high.
Gold Scrap Supply to Drop Up to 25% as Lower Prices Deter Sales -
Gold supply from recycled materialsmay fall by as much as 25 percent this year as lower pricesdeter holders from selling the metal at a time when physicaldemand is strengthening, according to the World Gold Council.
Colombia Illegal Gold Mines Prosper in Global Rout
Colombia’s unlicensed gold miners are proving to be resilient to the steepest price drop in 16 years and government efforts to regulate their operations.
Goldcorp And Why Gold Miners Are Getting Crushed: Massive Cost Inflation, Dropping Prices
It hasn’t been a hospitable environment for gold miners, the embattled sector which has had to suffer both falling commodity prices and rising costs.
Seizure of smuggled gold zooms 365% in Q1
After a two-decade lull, gold smugglers seem to be back in business in India, thanks to recent hikes in import duty on gold — from about one per cent to eight per cent in 18 months. In the April-June quarter of this financial year, seizure of smuggled gold hit Rs 59.82 crore — an increase of 365 per cent over Rs 12.86 crore in the same period a year ago. In volume terms, the increase would be even higher, because the average gold price in the quarter came down 6.6 per cent from that in the same quarter last year.
Gold Smuggling Soars In India
India, the world’s largest gold consumer, meets almost all of its demand via imports, and purchases from abroad require buyers to sell the rupee to raise greenbacks. Government efforts to curb imports is meant to limit that downward pressure on the currency but has instead driven a surge in illegal imports (smuggling) of the precious metal.
Canadian bankers feeling the pain of ‘decimated’ mining sector
One small brokerage firm, Fraser Mackenzie Ltd., closed earlier this year. Casimir Capital Ltd., a closely held investment bank, has cut jobs on its mining team and is shifting its focus to energy companies. Even Toronto-Dominion Bank, Canada’s second largest lender by assets, has moved investment bankers into other areas.
Silver streams, mine closures and finding the floor – Smallwood
The severe drop in the price of precious metals has already taken its first victims, with a growing number of higher cost producers, juniors ones especially, announcing mine closures. Silver Wheaton, a top silver streaming and royalty company, is not immune.
Indian jewellers in a quandary over 20-80 export restriction
The gems and jewellery industry in India is in a quandry. Facing a severe liquidity crisis, retailers are up in arms about the new 20-80 principle worked out by the Reserve Bank of India to curb gold imports.
Goldcorp reports massive US$1.93-billion second-quarter loss on Penasquito impairment
Goldcorp Inc. reported an enormous net loss of US$1.93-billion in the second quarter after taking a big writedown on the Penasquito mine in Mexico.
COMMENTARY
Shocking Things Wall Street Financiers Say Off the Record About Their Bloated, Corrupt Industry
“A particularly troubling and consistent finding throughout the survey is that Wall Street’s future leaders–the young professionals who will one day assume control of the trillions of dollars that the industry manages—have lost their moral compass, accept corporate wrongdoing as a necessary evil and fear reporting this misconduct.”
Why the US State Is Building a Totalitarian System –
Jimmy Carter is making waves: “America does not have a functioning democracy at this point in time,” he told a meeting of the American Bridge, held in Atlanta, when asked about Edward Snowden’s exposure of Washington’s secret global surveillance system. Looks like the only outlet that covered the meeting was Der Spiegel, but word is spreading and it won’t be long before the Usual Suspects start ranting about what a flake Carter is, and that he should shut up already and go lock himself in his presidential library. But think about it: for a former President to say this is unprecedented in modern times.
Despite Declining Deficit, Foreigners Aren’t Bailing Us Out, So the Fed Will Keep QE Going
The basic imbalance driving our economy is the government deficit, which spun out of control as a result of the Credit Crisis of 2008/9. But the sequester, improving tax base, lower interest rate, and elimination of stimulus spending have caused the big government deficit, while still extreme, to drop to half its previously nosebleed levels.
The Prudent Bear: The One-Year Anniversary of “Do Whatever it Takes”
Mario Draghi’s “ad-libbed” comments one year ago (July 26, 2012) altered the course of financial history: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
Palast: Did Fabulous Fabrice Really Cause the Financial Crisis
Here is a reminder from Greg Palast, who is one of those rarest of creatures, the investigative journalist, about what caused the last financial crisis, and the source of the criminogenic environment that is likely to be a major contributing factor to the next.
Comex Must Change Its Delivery Mechanism Soon
The cause of today’s spectacular rise in the gold price is the reality that with Friday continues large drops in the Comex warehouse gold inventory. No cogent argument can be formed against the reality that because of the continued fall in gold inventory that within in 90 days or sooner the Comex must change its delivery mechanism.
Morgan considers exiting commodities business but will stick with gold
The announcement capped a week of intensifying scrutiny of banks’ role in the raw materials supply chain. The Federal Reserve said on July 19 it was reviewing a landmark decision to permit banks to own physical commodities, not only paper derivatives. On Tuesday witnesses at a Senate hearing raised questions about metal warehouses, power plants and tanker vessels owned by banks.
Dennis Gartman insists that there are no conspiracies in gold
Today’s “Talking Numbers” program by CNBC and Yahoo Finance concocted a silly pillow fight between two talking heads, commodity letter writer Dennis Gartman and UBS and CNBC analyst Art Cashin, over “gold conspiracy theories,” Cashin having remarked this week, if a bit incoherently, that something seems to be wrong in the gold market.
The Sun Shines on Silver Sprott
Solar power appears to be coming back with a vengeance on the back of recent announcements by China and Japan. Both countries are pushing for new programs to significantly increase their solar power capacity in the years ahead.
Have gold miners missed the hedging boat?
After spending billions of dollars unwinding hedgebooks over the course of the bull-run, the practice has become somewhat of a four letter word in the gold market.
Gartman to Cashin: There is no gold conspiracy
Art Cashin, UBS Director of Floor Operations on the New York Stock Exchange, and Denis Gartman, founder and publisher of The Gartman Letter, each has their take on whether there’s substance to gold conspiracy theories. Today on Talking Numbers, Gartman responds to Cashin’s most recent comments.
Gold – I Never Have Been More Bullish!
After no involvement with gold for a few years, I came back into the gold market in the spring of 2003 because it looked like gold had bottomed—it was just under $325 at the time—and the thought was that it could make a run towards key resistance at $400. That’s right – $400. While stepping aside for corrections in gold and silver along the way, I rode gold to its September 2011 highs…
Dennis Gartman: Gold is going ‘several hundred dollars higher’
The selloff in gold has run its course, and the precious metal is set on an upward trajectory, Dennis Gartman the closely followed commodities trader and founder of The Gartman Letter, told CNBC.
If you believe gold’s going to go up, buy silver
In yesterday’s trade gold moved up nearly $40 an ounce and has maintained its higher level overnight. Silver was initially slow to move, but then also managed a gain of close on $1 per ounce.
India witnesses spurt in Gold smuggling
News reports and statements by the Directorate of Revenue Intelligence points to the alarming increase in gold smuggling through international airports in India. Delhi, Ahmedabad, Mumbai, Kochi, Kozhikode airports have witnessed increase in gold smuggling, according to news reports.
FT is sure that new gold exchange in South Korea will flop
To much fanfare South Korea has announced it plans to set up a gold exchange in 2014 — but analysts warned that it might be poorly timed, given weak demand for bullion amid the global economic slowdown.
Gold going to $7,000 in currency reset says author Jim Rickards
Gold prices will surpass $7,000 an ounce in an inevitable global currency reset forecast author of the new book ‘Currency Wars: The Making of the Next Global Crisis’ and MD of Tangent Capital, said Jim Richards speaking at the Agora Financial Investment Symposium in Vancouver yesterday.
Gold’s price fall was the ultimate in manipulation and it won’t stay down
It was Agora Financial editor Byron King addressing its last-ever Vancouver mega-conference yesterday who summed up the biggest mystery of the event this week: ‘The gold price fall, well I just don’t get it!’
Sloe gin and big cycles: Graham Birch on markets and gold
Cheddar is set to outperform tractor fuel over the next decade but will struggle to outpace gold, according to Dr. Graham Birch, former head of BlackRock’s mining mandates.
Long term upside for gold could be immense
My colleague, Alex Williams (no relation), reported yesterday on Mineweb on a great interview with Graham Birch, now a dairy farmer, but who in the past was seen as responsible for building the then Merrill Lynch – now BlackRock – Gold & General fund to its dominant position in the sector between 1999 and 2009. In the interview (see: Sloe gin and big cycles: Graham Birch on markets and gold) Birch, who continues to closely follow the sector, made some very salient comments which any precious metals investor should keep strongly in mind, particularly given the kind of gold price scenario we have seen in the past few months.
Rick Rule is a pink elephant if this is not the market bottom for gold stocks
Vancouver’s favorite mining shares’ broker Rick Rule just delivered a stunning speech to the last-ever Agora Financial Investment Symposium on investment right now that effectively concluded that if this was not the market bottom or very close to it he was a pink elephant.
Art Cashin: Gold Backwardation Conspiracy
While most theories are easily dismissed, some stay around for a while due to a confluence of circumstantial evidence surrounding them.
Gold will move in hundreds of dollars a day on Comex soon says Jim Sinclair
World famous gold guru Jim Sinclair is telling his followers that the gold price will soon move in ‘hundreds of dollars a day’ when the Comex changes its settlement rules as it must because the exchange is running out of physical gold.
Shortages, warehouses and misinformation: Comex gold explained – WHATS NEW
THERE HAS been a lot of misinformation recently about Comex warehouse gold stocks.
80% dip in gold imports linked to rampant smuggling
NEW DELHI: Financial intelligence agencies are alarmed by the steep and sudden fall in gold imports recorded for June, suggesting large-scale smuggling of the yellow metal since import duty was increased from 6% to 8%. Gold imports fell by 80% from 160 tonnes in May to only 31 tonnes in June barely a month after the new import duty for gold, RBI curbs on banks and government ban on sale of gold coins and bars came into force.
AUDIO/VISUAL