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Contrarian
Profits reports about gold this Tuesday/Wednesday.
(emphasis mine) [my
comment]
And
Then There's This…Wednesday, May 20th, 2009
May 20th, 2009 By Ed Steer
The low for gold was at the Sydney open, and from there it rose slowly and
steadily through Far East, London and Comex trading in New York. The high
came in electronic trading about an hour after the Comex close. Gold managed
to make it to $928…but was not allowed a sniff of $930 yesterday. Maybe
today. [gold is now at $941]
[I added this chart to the article to make it clearer. Gold prices on Tuesday
are in blue (apparently "very powerful attempts to move gold up"
were blocked Tuesday). Gold prices for Wednesday are in red (notice the
breakout above 930).]
Although trading appeared quiet, the usual N.Y. commentator said
otherwise…"Today's up $5 June gold Comex close [at $926.70] was
quietly dramatic. A rally effort on the Comex open was contained under $3 on
very heavy volume [41,523 lots estimated by 9 a.m.]. Very powerful attempts
to move gold up after 12 noon were also blocked [Blue
line in graph above]. Estimated volume jumped 25.6% in the 12
noon/1 p.m. space for a totally reversed gain of $2. An astonishing 36.4%
[20,000 contracts] leap in estimated volume between 1 p.m. and the close
[less than a tenth of the trading day] established a gain of less than $1. Final
estimated volume was 120,029 lots. After the floor [Comex] close, gold was
run up almost $2 and then was sold aggressively into the stock market close,
losing almost $5. The gold shares did not like this and gave ground; however
the HUI still closed up 2.76% on the day.
"The c. $930 level is being more violently defended than casual
observers realize: it will be remembered there was a seller on the London
a.m. fix today as well. But with India in buying mode, there can be only one
result - unless the Reserve Bank can be induced to weaken the rupee." [Which
is exactly what
they did in early morning trading in the Far East today...and I'll let you
know tomorrow if it made a difference in Indian imports today. - Ed]
Silver didn't do much until around 11:00 a.m. in London yesterday morning. From
there, it ran up 50 cents…before, it too, got sold off exactly as gold
did. The silver shares did really well yesterday.
Yesterday's brutal sell-off in both gold and silver produced the following
changes in open interest. In gold, o.i. fell 1,601 contracts to 365,631
contracts on a volume of 122,086, including switches. In silver, o.i. rose a
smallish 177 contracts to 94,673 contracts on light volume of
16,891…including switches.
In other gold news…and in further remarks from the usual N.Y.
commentator…"there was a Reuters story
yesterday that confirmed the revival of Indian gold demand…'Demand has
increased many fold compared to last week as prices have fallen,' said a
dealer with a state-run bank in Mumbai. And further…'Indian jewellers
chased gold bars as a firm rupee sparked buying… India is active.
There's been good physical demand. The rupee could be a reason, but they
haven't imported much gold for quite a while. It's time for them to replenish
stocks,' said a dealer in Singapore. The European Central Bank's weekly
statement of condition indicates that 'gold and gold receivables' fell
€14 million last week which 'reflected the sale of gold by one
Eurosystem central bank.' That is 0.63 tonnes: last week's sales was 0.54
tonnes. At present, the ECB squadron appears unwilling to be seen in the gold
market."
There were no changes at GLD, SLV, or the U.S. Mint. At the Comex yesterday,
there were 44 gold contracts delivered and 114 silver contracts as well.
There's not much left to deliver in the May silver contract unless some new
orders demanding physical show up before the end of the month. Over at the
Comex-approved warehouses, silver stock fell a smallish 158,162
ounces…bringing the total Comex silver inventory to 119,527,422 troy
ounces.
I see in a Bloomberg story that U.S.
housing starts plunged to a record low in April, despite a gain in starts in
single-family home. In a banner on Bloomberg's website, they were also
bemoaning the fact that sales and prices were falling precipitously in the
Hamptons, and the rich in California were defaulting on luxury homes just
like the subprime victims. They also noted that Q1 home prices in southern
California had fallen another 36% year/year. As I keep saying…call me
in 2013 and we'll talk about a bottom in the U.S. real estate market. [I
disagree. The bottom for housing prices will come in some time later this
year when the dollar's fall picks up steam. However, in terms of gold, home
prices will continue falling till around 2013.]
I have five stories again today…and they're all worth your time
…and I mean it [Agreed]. The first is a
piece from Casey Research's own
Managing Editor, David Galland. It's posted over at kitcocasey.com and
bears the title "Tax Revenue Tanking"…"a disturbing
trend on the other side of the equation is now emerging: how much [or rather,
how little] the U.S. government is receiving in tax revenues." The link
is here. [If I
have time, I will blog this article later]
The second story is from Bloomberg. The BIS has
released its bi-annual derivatives report for the last half of 2008.
"The amount of outstanding contracts linked to bonds, currencies,
commodities, stocks and interest rates fell 13.4% to US$592
trillion…the first decline in 10 years of compiling the data."
Naturally, credit default swaps were right at the top of the heap. It appears
that the entire derivatives market is in full-scale retreat at the moment. I
guess it's easy to figure out where all that TARP money has been spent. The
article is entitled "Derivatives Market Declines for First Time on
Record" and the link is here.
And in the "You can't make this stuff up!" category is this Bloomberg
story. In it, two economists are suggesting that a 6% rate of inflation for a
couple of years "would make it easier for debt-strapped consumers and
governments to meet their obligations. It might also help the economy by
encouraging Americans to spend now, rather than later, when prices go
up…if Americans were convinced of the Fed's commitment [to higher
inflation], they'd buy and borrow more now…". [You
can check out any time you want...but you can never leave. -
Hotel California] The headline reads…"U.S. Needs More Inflation
to Speed Recovery, Say Mankiw, Rogoff" and the link is here. [Unbelievable]
Bloomberg also
provides the fourth story today. This one was tucked away in one of the
darker recesses of their website…and it was only by pure luck that I
stumbled upon it. It [like the rest of the stories posted today] is worth
reading. The headline says "Gold Demand Rises 38% in First Quarter,
World Gold Council Says". The link is here.
And lastly is this piece by Rob Mackinaly of Financial Express in
London. He reports that European gold ETFs are disputing each other's costs
and claims of safety. It's turning into a pissing match extraordinaire, with
Hugo Stalder, product manager at ZKB [Zürcher Kantonalbank] saying
"If someone is looking for the best security, he looks at our ETF with a
spread of 0.5 per cent and he may look at iShares where he's
not sure he has full coverage of gold." Stalder said that this was not
his view, but the view of some of ZKB's clients. A spokesperson for iShares would not comment on the
claim. [Not comment? Gee, I wonder why? - Ed] Mackinaly's
story is headlined "$4 Billion Swiss Gold ETF: Paranoia Premium or Plain
Expensive?" and the link is here. [Swiss
gold ETFs are the only ones I consider safe to buy right now]
Regulation
of derivatives transactions that are privately negotiated by professionals is
unnecessary. - Alan Greenspan…July 30, 1998
In closing, here's a Bloomberg story that just
didn't make the cut. That was the news that Japan's GDP fell an annualized
15.2% in the first three months of 2009…as "exports collapsed and
consumers and businesses slashed spending." The story was filed from
Tokyo this morning. Welcome to the "greater depression." The
only solutions left are "inflate…or die!" Inflation it will
be…and lots of it.
See
you on Thursday.
My reaction: Bunch
of interesting info and links in this article.
1)
Evidence of gold manipulation is obvious, as seen by the desperate
defense of the $930 level.
2)
These attempts to suppress gold are failing.
3)
Indian
gold demand has revived.
4)
Tax revenue is tanking.
Conclusion: Gold
heading up to $1,000 again, and, this time, it is never going back down.
Eric
de Carbonnel
Market Skeptics
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