http://www.caseyresearch.com/gsd/edition/tocqueville-gold-funds-hathaway-earns-a-probationary-tin-foil-hat
Following BoE Carney's earlier dovishness, and purely by "coincidence" according to Draghi, the ECB has "extended forward guidance" on rates for the first time - once again changing rules and clearly indicating (in spite of his explicit comments that he is not) the ECB's reaction to Fed and BoJ instability introduced into markets. The OMT remains a ghost - but he promises its there if they need it - and negative rates are still on the table. All this jawbone easing (for critically nothing was said apart from no withdrawal of liquidity anytime soon) has sent markets surging higher on a US-market-holiday-induced low liquidity background...
The all important ECB press conference is set to begin momentarily. Will Draghi answer questions regarding the readiness of the OMT's use in Portugal whose short end has exploded this morning, or will he be forced to wait for the German court's decision first? Or maybe Draghi will finally have some comments on either the ongoing Monte Paschi scandal or the recently revealed Italian derivative debacle which took place under Draghi's watch. We somehow doubt it...
¤ YESTERDAY IN GOLD & SILVER
The gold price didn't do much in Far East trading, but tried to rally around noon in London...and then again once the London p.m. gold fix was in at 10:00 a.m. EDT...but both rallies met with the same fate...a seller of last report. After the second rally got capped, the gold price didn't do much for the remainder of the trading day in New York.
Gold's high price tick of $1,261.00 spot came shortly after 10:00 a.m. EDT.
The gold price closed the Wednesday session at $1,252.50 spot...up $10.10 on the day. Not surprisingly, with everyone in New York heading out early, the net volume was a smallish 117,000 contracts.
The silver price followed a similar path...and the blast off after the noon London silver fix probably made it past the $20 spot price mark for a moment...and a not-for-profit seller had a throw a fair amount of paper silver at it before the rally collapsed. The rally at the 3 p.m. BST gold fix met the same fate...and after that, the price traded flat for the remainder of the New York session.
Kitco recorded the New York high tick as $19.97 spot.
Silver finished the day at $19.72 spot...up 34 cents from Tuesday. Not surprisingly, with both rallies getting hit hard, net volume was pretty hefty...around 38,000 contracts.
Platinum got sold down a bit yesterday...and palladium traded sideways. Here are the charts...
The dollar index closed late Tuesday afternoon in New York at 83.54. Once trading began in the Far East on their Wednesday, the dollar rallied a hair...up to 83.68...by 9:00 a.m. BST in London. It was all down hill from there, with the spike low of 83.12 coming a few minutes after 11:00 a.m. in New York. The index recovered a handful of basis points from there...and closed at 83.24...down 30 basis points on the day.
The CME's Daily Delivery Report showed that Wednesday was another JPMorgan/Bank of Nova Scotia duet in both metals. There were 10 gold and 221 silver contracts posted for delivery within the Comex-approved depositories next Tuesday. In silver, Canada's Bank of Nova Scotia was the short/issuer on 202 contracts...and JPMorgan Chase was the only long/stopper of note, with 192 contracts in its proprietary trading account...and 22 contracts for its client account. The link to yesterday's Issuers and Stoppers Report is here.
There were no reported changes in either GLD or SLV yesterday...and no sales report from theU.S. Mint, either.
Over at the Comex-approved depositories on Tuesday, they didn't report receiving anysilver...but they did ship 428,838 troy ounces out the door for parts unknown. The link to that activity is here.
They didn't report receiving any gold...but Canada's Bank of Nova Scotia reported shipping out a couple of kilo bars of the stuff...64.30 troy ounces.
I have the usual number of stories for a mid-week column...and I hope you find the time to read the ones that you deem worth your while.
Selected news and views.....
QE or not QE? That is the first tricky question for Mark Carney
Mark Carney casts his first vote on the Monetary Policy Committee today. It will be a seminal decision, albeit one the rest of the country is unlikely to discover until the minutes of the meeting are published on July 17th.
The new Bank of England Governor has to decide whether to ape his predecessor, Sir Mervyn King, and call for more quantitative easing (QE), or vote with the majority of the MPC and leave the £375bn stock unchanged.
A bald look at the numbers should, in theory, make it easy. Carney appears to have joined just in time for the end of QE.
This news item appeared on the telegraph.co.uk Internet site yesterday evening BST...and I thank Manitoba reader Ulrike Marx for today's first story.
Downward Spiral: Southern Europe Remains Stuck in Crisis
The sovereign debt crisis has been eating its way through the Continent for the last four years, despite the various remedies prescribed by crisis managers in Brussels and Berlin, and at the European Central Bank (ECB) in Frankfurt. The situation in the euro zone eased somewhat after ECB President Mario Draghi's announcement last summer that he intended to do everything possible to preserve the euro. But it is now becoming clear how deceptive this period of calm was. Since US Federal Reserve Chairman Ben Bernanke announced his aim to gradually pump less money into the financial markets, interest rates have gone up considerably in both the United States and Europe.
With the sedative effect of cheap money now diminishing, it is becoming clear what risks still lurk in Europe's debt-ridden economies, and that many problems remain unsolved. Sovereign debt is rising rapidly, not just in Spain, but also in Greece, Italy and Portugal, despite austerity policies and impressive reform efforts. The countries have significantly reduced spending in response to pressure from the so-called troika, consisting of the European Commission, the ECB and the International Monetary Fund (IMF). But the recession has led to a concurrent decline in revenues. In addition, devastatingly high unemployment has led to higher government spending.
It has created a vicious downward spiral. And economists have been left to argue over whether and how the countries in question might be able to emerge from it.
This story was posted on the German website spiegel.de yesterday afternoon Europe time...and it's the first contribution of the day from Roy Stephens.
The London Gold Market: What’s behind the smoke and mirrors?
The London Gold Market, accounts for over 90% of all global over-the-counter (OTC) activity. In 2011 it accounted for 86% of total activity within the global gold market, 90% of which was spot transactions.
In comparison COMEX in New York accounted for just under 10% of total volume in 2011. Also unlike COMEX, the London gold market is entirely inaccessible to individuals and retail trade, the minimum amount of gold traded (per single transaction) is 1,000 oz.
It will come as no surprise to readers when we say that the London market is exceptionally opaque.
It certainly is...and everyone that says they know what's happening inside the London bullion market is telling a big fib. This longish article was something I dug out of a GATA release yesterday.
Gold smuggling rampant in India
Gold smuggling has gone up several notches in India. The Air Intelligence Unit of the Mumbai Customs thwarted an attempt to smuggle gold into the country from Dubai. This is the sixth attempt thwarted in the past seven days.
On July 3, three passengers were arrested from the Mumbai International airport for allegedly trying to smuggle in 2.86 kilo of gold worth $112,883 (Rs 6 million) from Dubai in three separate cases.
The craze to bring in gold into India has reached unprecedented levels. Authorities said the smuggling from Dubai is rampant, since gold costs $1,659 (Rs 100,000) more per kilo in Mumbai. Bringing it in from Dubai works out cheaper for the consuming class in India.
The seizure of 94 gold biscuits worth $436,653 (Rs 26 million) from five Sri Lankan nationals at Chennai airport late last month has also exposed an active racket of smugglers and money launderers with Dubai links.
No surprises here...and it pretty much goes without saying that only a tiny fraction of the smuggled gold is actually being found. This news item was filed from Mumbai...and posted on the mineweb.com Internet site yesterday. It's courtesy of Ulrike Marx.
Huge premium on gold in India as government tries to destroy the industry
India's gold imports in June are estimated to have fallen drastically to 35-40 tonnes, less than a quarter of what the purchases in May were because of state restrictions, triggering a sharp rise in premiums in the local market and raising a question mark on the survival of small jewellers.
The acquisition cost of the yellow metal has shot up as bullion dealers are now charging a premium of up to Rs 350 per 10 grams over and above the metal's international price, up from only Rs 40 two weeks ago.
"It is becoming increasingly difficult to get supplies. Most banks have stopped importing gold which has created a supply shortage in the Indian market. Bullion dealers are offloading gold that they stocked during April and May at a high premium," said Bachhraj Bamalwa, director of Nemichand Bamalwa & Sons.
Bamalwa said that if situation does not improve in the next fortnight, the survival of a large number of unorganised players will be at stake. "Nearly 3.5 crore people are attached to this trade and their jobs now hinge on the government's move," he said.
This news item, filed from Kolkata, was posted on the Times of India website yesterday, and I borrowed it...and the headline...from a GATA release. It'sdefinitely worth reading.
Singapore opens world's first physical precious metals exchange
In yet another attempt to encourage gold trading in the country, Singapore's SGPMX, (Singapore Precious Metals Exchange) on Wednesday launched the world's first physical precious metals exchange with peer-to-peer bullion trading capabilities integrated into the trading platform.
As part of the launch, SGPMX also announces the entry into an MOU with Certis CISCO which will act as the custodian for bullion storage.
The platform which will operate 24/7 will allow investors and traders to buy and sell physical gold for as little as $1,000.
After they have bought it, the exchange will also provide facilities to store the gold with Certis Cisco Singapore.
This news item appeared on the bullionstreet.com Internet site at noon IST yesterday...and I thank Ulrike Marx for her final contribution to today's column.
Tocqueville gold fund's Hathaway earns a probationary tin-foil hat
Tocqueville gold fund manager John Hathaway's new investor letter attributes the recent fall in the gold price to a bear raid by investment banks and hedge funds doing naked shorting.
Hathaway acknowledges gold's function as insurance against the failure of the policies of central banks and speculates that the Federal Reserve can't return the German Bundesbank's gold because the Fed has re-hypothecated it into oblivion.
Of course Hathaway still can't quite formally link central bank policy to gold price suppression, despite all the documentation -- but insofar as he now maintains that certain entities act in concert to suppress the gold price, he may start to be considered a "conspiracy theorist" and has earned a probationary tin-foil hat. If only he would try motivating the gold mining companies in which his fund invests to contest the suppression of the price of their product, as a matter of their duty to their shareholders. But then maybe that would raise the question of his own fund's duty to its shareholders, who include your secretary/treasurer.
Advocating gold ownership, individual liberty, limited government, and the brotherhood of man is not and will never be the formula for respectability. One can't be in gold as a matter of principle and be respectable too.
Chris Powell, GATA's secretary/treasurer, has more to say in thisabsolute must read commentary posted on the gata.org Internet site yesterday.
Eric Sprott: Gold’s Lower Price is a Ruse
“It was my feeling that during the first quarter of the year, up until April 15th, there were many signs that there was going to be a shortage of gold. We wrote an article about a year ago, titled ‘Do Western Central Banks have any gold left?’ where we quantified that there’s been probably an extra 2,300 tonnes of demand every year since 2000, and yet gold production has not gone up in that time frame.”
But instead of a demand squeeze, driving prices higher, gold has declined from nearly $1,700 at the start of the year to lows of around $1,200 now. How could the price decline if there truly was a shortage?
Mr. Sprott continues: “I put the slam down to the people who are short gold – it’s been very well-documented that certain parties had very large short positions in gold. The short holders, who were expected to deliver gold that was not deliverable, could have created this downdraft in order to cause gold to come into the market.”
“But it totally backfired,” says Mr. Sprott. The sudden drop in price led to extreme levels of demand for physical metal even as “paper gold” sold off heavily, says Mr. Sprott, citing record demand for physical metal, particularly out of India and China.
“I would venture to say, at the kind of rates of consumption we have now, we might have a 4,000-ton shortage in a 4000-ton market.” So how could the market bridge the gap?
This longish edition of Sprott's Thoughts was written by Henry Bonner...and posted on the sprottgroup.com Internet site yesterday. It's definitely worth reading.
Market Response To Tidal Wave Of Central Bank Dovishness
Submitted by Tyler Durden on 07/04/2013 - 09:30Following BoE Carney's earlier dovishness, and purely by "coincidence" according to Draghi, the ECB has "extended forward guidance" on rates for the first time - once again changing rules and clearly indicating (in spite of his explicit comments that he is not) the ECB's reaction to Fed and BoJ instability introduced into markets. The OMT remains a ghost - but he promises its there if they need it - and negative rates are still on the table. All this jawbone easing (for critically nothing was said apart from no withdrawal of liquidity anytime soon) has sent markets surging higher on a US-market-holiday-induced low liquidity background...Mario Draghi Press Conference - Live Webcast
Submitted by Tyler Durden on 07/04/2013 - 08:30The all important ECB press conference is set to begin momentarily. Will Draghi answer questions regarding the readiness of the OMT's use in Portugal whose short end has exploded this morning, or will he be forced to wait for the German court's decision first? Or maybe Draghi will finally have some comments on either the ongoing Monte Paschi scandal or the recently revealed Italian derivative debacle which took place under Draghi's watch. We somehow doubt it...
*DRAGHI SAYS ECB RATES TO STAY LOW FOR EXTENDED PERIOD OF TIME
*DRAGHI: IMPROVEMENT IN FINANCIAL MARKETS SHOULD REACH ECONOMY
*DRAGHI SAYS INFLATION RATES MAY BE VOLATILE THROUGHOUT YEAR
*DRAGHI: RECENT TIGHTENING OF MARKET RATES MAY WEIGH ON GROWTH
*DRAGHI: IMPROVEMENT IN FINANCIAL MARKETS SHOULD REACH ECONOMY
*DRAGHI SAYS INFLATION RATES MAY BE VOLATILE THROUGHOUT YEAR
*DRAGHI: RECENT TIGHTENING OF MARKET RATES MAY WEIGH ON GROWTH
¤ THE WRAP
The metal that came out of the GLD and other gold inventories [In the first half of 2013] was, obviously, bought by someone (I contend that JPMorgan is the prime candidate). There are two factors here – investor liquidation in GLD (and not in SLV) and, separately, the requisite purchase of the shares or the metal by counterparties. The reason so much gold came out of the GLD was that by buying it as metal first converted from shares of the ETF, JPMorgan could buy it without publicly reporting ownership, as they would have had to do if they purchased the shares of GLD that were sold. In SLV, there was metal bought by JPM on liquidations, just nowhere near as much (in dollar terms) as the gold that was liquidated in GLD. - Silver analyst Ted Butler...03 July 2013
It was obvious from the price action in both London and New York yesterday that both silver and gold wanted to rally...and it was equally as obvious that there were sellers of last resort waiting to nip these rallies in the bud...and that's what happened. Nothing, for the moment, has changed.
But that still hasn't altered the fact that at some point in time, certainly not known to us, there will be a price adjustment to the upside that will shock everyone, me included.
I'm very comfortable making that claim, as the current situation...grotesque as it is...can't continue indefinitely.
With the U.S. summer holidays officially 'on' as of today, it's hard to tell when all of the above will transpire...but transpire it will.
As I mentioned in this space yesterday, we'll get the jobs numbers at 8:30 a.m. EDT and, as always, it will be interesting to see how gold and silver 'react' to the news...or are allowed to react. We'll know soon enough.
In overnight 'trading' in the Far East on Thursday...if one wishes to dignify it with that name...everything is as quiet as church mouse...with no price action or volume worth mentioning...and the dollar index is comatose as well. The London market opens in about ten minutes from now as I write this paragraph...and it will be interesting to see what transpires at that juncture.
As I hit the 'send' button at 4:15 a.m. EDT...the London market has been open for a bit over an hour...and nothing is happening there, either. Volumes are still microscopic...and the dollar index is not doing a thing...so I'm off to bed early.
If everything is this quiet for the remainder of today, then it's pretty much a given that I won't have a column on Friday...and an extra day off would be nice. However, I will have a column on Saturday...although it will be as short as I can possibly make it, as there will be no Commitment of Traders or Bank Participation Reports to talk about.
See you then.
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