Saturday, March 1, 2008
gold closed up by 4.60 by the close at 1:30 pm to 470.40 but in the access market gold soared a further 4.00 to 474.40. Silver rose by 9 cents to close at 19.71. In the access market it rose a further 20 cents to close at 19.91. In earlier European trading, silver rose above 20.00 per oz
As I promised you on Thursday, a raid on the precious metals was forthcoming. The cartel raise the premiums on the gold-share puts enticing the trading on this vehicle. As more players are sucked in, they attack the next day. We can predict now quite accurately when a raid will occur.
The open interest on gold comex rose by only 2408 contracts to 495000 despite Thursdays stellar performance of gold. The silver OI continues to drop as the new OI is now 167000 a further drop of 1200 contracts. Silver metal price rose by 44 cents on Thursday.
This is perhaps the first time that we are witnessing the cartel bail out of the physical metal contracts as they ascend to lofty levels. Generally when you see this one must be cognizant of a commercial failure in both metals.
In silver which is now in its delivery month, a total of 54 million oz of silver are standing. (50 million for the March 1 delivery and 4 million from Jan options).
The comex states that it has about 80 million oz registered or "for sale silver" but you can discount that by 50%. The true probable amt for sale is around 40 million oz. Also it is taking the entire month for the cartel to arrange to satisfy buyers. In previous times, 95-98% of the contracts were delivered upon in the first day. Not now!!
However judging from the numbers of open interest, certain cartel members are feeling the boiling heat and they are "getting out of Dodge". On the first day notice 25% of the silver contracts were delivered upon and the entire load was satisfied by Scotia Macotta, the world's largest silver shorter.
The comex states that 1-4 traders are short 279 million oz of silver. There are two major shorters in the silver market, HSBC the big Hong Kong bank and Scotia Macotta. If you include London, the total short positions by banks are in excess of 600 million oz.
Jim Rogers, the commodity guru came out yesterday and stated that the usa is "Out of Control". He has forever told people to purchase base metals, sugar, gasoline etc. He was always lukewarm on gold until yesterday. He postulates that gold will rise to 3500.00 this year.
At 11:30 yesterday, the Director of Research at Calpers, the big investment arm of the teachers union published a book called "Buy Gold Now" You can bet that Calpers with 240 billion dollars under its belt will be buying gold big time if not already. The director wishes to increase its gold
investment 16 fold to 7.1 billion dollars worth of gold.
Yesterday, the Dow tanked by 315 points. Our cartel members knew that the market was in trouble as Bernanke on Thursday stated that he expects some usa bank failures. The market did not like to hear that. Generally, when the cartel knows that the market is going to come under pressure, they lean on gold and silver to prevent the world from seeing a panic. The cartel,
true to form started to raid gold early in the day at 3 am right after the London first fixing of gold,pushing it down by 7.00 dollars but there were too many players waiting in the wings. They pushed gold quickly into positive territory where it finally ended the day at 974.40.
The Feb purchasing managers index in Feb fell from 51 to 44. The concensus was for 49.0 Anything below 50 means a contraction in manufacturing, so the Mid West is seeing its business activity contract big time.
US consumer confidence fell to its lowest level ever in February as reported by the University of Michigan. It fell to a 16 year low of 70.8
Charlie Gasparino announced that the bailout of Ambac has hit financial snags. There is only one way out for the insurers and that is nationalization. They will be taken over by the central banks just like Northern Rock by the Bank of England. Moodys claim that the losses on Ambac will exceed 12 billion dollars. Their retained earnings are only 1 billion.
Wall Street news announced that borrowers are walking away from mortgages as home prices continue to fall. As more home prices fall, more defaults will occur and further losses will occur.
In perhaps the biggest news of the day, UBS announced that it postulates that 600 billion dollars will be the sum of dollars lost because of the subprime-CDO fall out. So far about 160 billion dollars of losses has been recorded.
Wall Street was stunned by the huge losses at AIG. The big insurer reported a loss of 5 billion dollars after taking a hit of 11 billion dollars because of credit default swaps which went bad. You will all remember that AIG was once a big shorter of silver. It is believed that HSBC and Macotta took over their short positions.
The Bank of Montreal are taking 500 million dollars of off balance sheet losses and putting them onto their balance sheet. Expect all the banks will have to do likewise! The Bank of Montreal fell big time yesterday to 50.00. The yield is now 5.6% the highest level yield for all banks.
We are now witnessing major problems in the municipal bond market. Due to the problems with the insurers, these guys are having problems getting money and yesterday, Bloomberg announced that the Munis had their worst month in decades after collapsing demand for their securities. This sent the rate skyrocketing and now many of these issurers are trading with a yield of 20%.
Even state governments have seen their yields rise. Florida had to pay 5.35% for a fixed 30 year obligation. In early Feb it paid 4.6% for the same type of obligation.
The entire $330 billion auction rate market has all but dried up as dealers stopped buying the bonds after buyers failed to bid. This is a very serious situation!
In summary, I can safely say that gold and silver has now decoupled from the stock market. Gold and silver went up even though the market tanked. The shorters of gold and silver shares are still actively engaged in this fraudulent practice big time and that will explain the huge fall in the XAU and HUI index despite gold and silver's rise yesterday. These shorters borrow their securities from the depository and not from owners which is totally fraudulent. Our regulators look the other way at this practice. Gold and silver shares will resume their northern trajectory on Monday as the shorters try and cover as many of their short sales that they initiated on Friday.
The only way out for our banker friends it is provide huge amt of dollars to lift asset prices. They have only two choices:
1. print massive amts of paper to lift asset prices to bail them out of properties they have collaterized at higher prices
2. let the banks fail and thus credit disintegrate. This would lead to a massive deflation. Banks can never get out of deflation and this disaster generally goes on for years. Just look at Japan.
In other words: pick your poison!
speak to you on Monday
Thursday, February 28, 2008
gold closed up by 7.90 and its final spot price is 965.80. Silver rose by 44 cents to close at 19.64.
The open interest on gold declined by a few thousand contracts despite gold's big advance yesterday. The new OI is 495000.
Silver astonishes everyone. The open interest (OI) declined big time by 5100 contracts to 168000 and this is after silver's mammoth gain yesterday..
As far as gold is concerned, certain cartel members covered as the heat was getting to them.
The cartel abandoned ship in the silver market as the temperature rose to 160 degrees. They bailed!!
In the silver comex, over 60 million oz of silver remain. There are only 40 milloz of registered silver. It is going to be very interesting as tomorrow is first day notice. Tomorrow, the sellers of silver can hit the buyers . Generally 95% of the selling at comex happens on first day notice unless supply is a problem.
I also think that the option figures are not in the total figures. We will have a good grip on things tomorrow at 12:00 noon. To me there is a good bet that a commercial failure is upon us.
Many have asked me what a commercial failure is:
a commercial failure is a default by the comex (failure to deliver) and thus by its owners..all the bank owners of the comex. It is identical to a bank failure. If you line up at a bank waiting for your money and the bank manager says sorry we have no money in the vaults. Word gets out quickly that they are in trouble , and you will see a stampede as everyone lines up to get their money which is gone. Identical here in the comex pits. A failure to deliver is identical to a bank failure!!
I will report in detail on Saturday, the state of affairs at the comex in silver.
In other news, all commodities rose big time today. Oil is almost at 103.00 per barrel. Soyabeans is at a record 15.15 per bushel. Cocoa hit a 28 year high and all the base metals continued on their winning streaks at the LBMA. The CRB which is a measure of all commodities rose to a record 413.60 up 8.80
The usa dollar index hit rock bottom today closing at 73.68. All the banking derivatives are now underwater.
This is why Bernanke stated that he suspects that there will be banking failures. He is correct ..there are going to be several and they are going to be big!!
Rumours were flying today that bankers were going to suspend hedging due to the big advances in commodity prices.
I wonder if the bankers are going to let Barrick sink as they are in the hole by 5.5 billion dollars as is their friendly rival mining company Anglo who is down 6 billion despite both pledging to be rid of their hedges. They are going nowhere fast.
US jobless claims rose last week by 19000 as the economy stagnates. We are witnessing massive inflation with zero growth. (Stagflation)
Freddie Mac reported today and the weaker brother to Fannie Mae came in at a loss of 2.5 billion dollars for the 4th quarter much wider than the pundits thought they would report. Both Fannie and Freddie disappointed Wall Street with greater than expected losses due to the housing crisis.
Wall Street responded in kind dropping by 116 points. Wall Street did not like the earnings of Fannie and Freddie and were shocked that Bernanke expected some banking failures.
Merrill Lynch is reporting that they will lay off more workers beginning in March.
Then the Conference Board of the usa reported that the USA labour market could grind to a halt. They found that want-ads in January fell to its lowest level in quite some time.
Our commodity guru Bryant comments on silver and he notices that all prices of silver are rising along the future curve. Generally this means that higher prices are here to stay.
Put option premiums rose today which generally indicate that tomorrow will be a raid. It probably will have no effect as too many people are waiting in the wings to buy the precious metals.
I will give a comprehensive review on Saturday.
Wednesday, February 27, 2008
gold closed today up by 12.50 and it's final resting price was $958.70. It is down only a dollar in Japan trading at $957.70.
Silver on the other hand rose by 54 cents to 19.24. It is up a further 3 cents in Japan.
The open interest tells us a lot concerning the inner problems on the cartel. With gold rising big time yesterday, the OI rose only a small 1200 contracts to 495000
This suggests strong evidence that the cartel are covering their shorts in an awful hurry.
The open interest on silver declined by 3700 contracts despite the huge gain in silver yesterday. This means that the cartel were busy covering their massive shorts and could not supply any paper silver. Silver had no formidable defence by the cartel so it zoomed yesterday and then big time today.
The big news on silver was not reported in Midas but I will provide the results to you. The total silver standing for delivery is 28709 contracts or 143 million oz of silver. Yesterday I postulated that a little over 100 million oz of silver will stand. It gets better!! …………
1. the March volume today was an astounding 55916 contracts.
2. the May volume is 37529.
If the OI on March is 28709 what is the rationale for 55916 contracts to trade on the last day of the month?
It seems that we got quite a few queque jumpers who sold their longs in May and bought the nearby March fearing that they may not get their physical silver in May.
The comex has about 40 million oz of registered silver for sale.
I will know more tomorrow . (remember that we get figures 24 hrs later than the traders..they know already the open interest, which is probably why silver skyrocketed today). From my vantage point, we have a commercial failure in silver. There is no way they can supply 143 million oz of silver. If we get queuque jumpers, then the amt standing will increase and the cartel will have its hands full trying to satisfy the long holders.
I promise to keep you informed on this important development.
On economic news, we saw base metals continue to rocket northbound:
copper was up by 1.9% . (copper is 3.84 per lb.)
nickel rose by 3.81%
aluminium rose by 3.81%
zinc rose by 7.82%
lead by 2.09%.
all base metals continue to shine despite the weakness in the usa housing market.
USA durable goods fell by a huge 5% last month. The economy is weakening fast in the usa.
The usa mortgage applications fell to its lowest level so far in 2008.
New home sales fell by 2.8% in January.
Bernanke went on TV today and basically stated that he was going to lower interest rates again in March because of downside risks to growth.
The US is now in staglation as inflation in all aspects of the economy is blooming against a backdrop of a credit crunch.
As promised, Fannie Mae reported a huge loss of 3.6 billion dollars or 3.80 per share. The house was expecting a loss of only 1.20 a share.
The stock fell big time today.
In other news, the Central Fund of Canada announced that they were purchasing 57 million oz of physical gold due to their huge premium to NAV which is now at 13.1%.
The cartel do not like when entities purchase physical as this is taken off the market for good.
Late in the day, Anglo Ashanti announced that squatters entered their land in Ghana and occupied its site at its Obuasi mine. This mine produces 14 tonnes of gold per year or 435000 oz of gold. It is small but this mine is hedged. So Anglo must scramble and get gold from some other mine.
Anglo promised its shareholders that it would be out of the hedging business by Dec 2008. Good luck to them.. I doubt that they will be successful.
Their hedgebook loss rivals Barrick at minus 5.5 billion usa dollars.
Speak to you tomorrow
Tuesday, February 26, 2008
Today was quite a day. gold closed up by 8.70 and it rests at 946.10.However in Australia/NewZealand it is trading right now at 951.40. Silver closed at 18.66 up by a whopping 58 cents. It is now trading at 18.81.
As you can appreciate the cartel got stuffed pretty badly. The culprit which did the cartel in was silver. The cartel knocked gold down by 10 dollars but silver refused to budge. When they tried over and out again to knock silver down and failed , they retreated covering their shorts and the onslaught was on. Gold seeing its sister rally big time also caught headwinds and gold first went to par and then at around 11:30 rose steadily to finish up 8.70.
The open interest on gold was up slightly at 500 contracts despite gold's hit yesterday The big news was the OI on silver. With silver rising yesterday, the OI declined sharply which means the cartel covered bigtime. The OI for March remains high at 45000 or 225 million oz on this last day of official trading for silver. It looks like a further 1500 option contracts are taking delivery of silver contracts. When all the smoke is cleared, it looks like over 100 million oz of silver will stand tomorrow. If so, acommercial failure looms large.
In financial news, the PPI was released today and it was terrible. It rose a full 1% which portends future inflation.
The dollar tanked big time with the usa index falling below 75.00 a criticallevel. The Euro rose to 1.495 and the Cdn dollar rose to 1.02 to the usa dollar. All commodities are on fire with oil advancing above 100 dollars to101.50 per barrel. Wheat continues to rise as well as all the base metals.However real estate falls because of the debt problems. We are now facing serious staglation i.e. a severe rise in inflation with a stagnant economy.
The ECB announced the sale of gold for the week and they came in at a paltry 2.5 tonnes of gold. With Switzerland slowing down to about 11 tonnes per month, there is nobody coming forward and explaining who is supplying the gold metal. There can be only one source and that would be the IMF. There has been huge movement of gold out of the Bank of NY. This is probably foreign gold as they do not want to have any gold on usa soil.
We are witnessing home prices fall big time. In the 4th quarter prices dropped by 8.9 per cent. If prices fall by 25-30% we could be witnessing massive deflation. The Fed will work overtime in printing massive dollars to raise asset prices. The usa is in a massive financial mess!!
This Thursday we will witness earnings from Freddie and Fannie and then next week, we will see the parade of earnings from the banks. That should be fun!!!!!
The stock market rallied big time today because of the reaffirmation of thetripleA (AAA) rating of Ambac and MBIA, Ambac announced an elimination in its dividend. On Friday the stock market rallied because of the potential salvation of these two characters. Surprise! Surprise! no announcements whatsoever. However S and P reaffirmed its AAA and everyone on the boobtube was puzzled. If they are in such bad shape, how could be still have their AAA rating?
Right now, the Fed is pumping massive amounts of paper money into the market. Traders now realize that the market cannot go down.The lower usa dollar index will fry a lot of banking derivatives.
speak to you tomorrow
Monday, February 25, 2008
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Gold closed down by 7.30 but silver rose by 10 cents, closing at 18.08
The open interest on both gold and silver remained almost identical with gold OI rising by 500 contracts and silver by 400 contracts..very minor considering the huge trading volume on Friday. If you were to look at the silver OI for February you would see 56000 of OI or around 280 million oz of silver. Nobody moved and there is only 1 day to go.
On top of this we heard that 600,000 oz of gold was removed from the comex. This is not the comex gold purchased by investors. Somebody else removed gold that was stored at the comex.
Most of the news came from the treasury announcement that they believe they have a consensus that congress will approve gold sales.
Strange that this announcement came on the day before gold option expiry. It caused gold to fall by 10.00 but it started to creep back and by the end of the day it was only down by 5.00.
Goldfields announced that production will fall by 25% because of the power outages. As I pointed out to you on many occasions, the power outages in South Africa is huge. South Africa still produces 260 tonnes of gold and the market is desperate to get hold of this physical production.
While this is going on, wheat is rising exponentially with Minnesota wheat rising to 24.00 dollar per bushel. Three years ago it was trading at 4.00 per bushel.
Oil hit 100.00 dollar per barrel and many base metals are rising to record levels despite the usa slowdown.
We have stagflation at its finest.
The Ambac Financial situation is still not resolved. I pointed out to you that their only salvation is nationalization by the state in the same manner that Northern Rock was taken over by the Bank of England.
Rumours are abound that Goldman Sachs is going to report softer numbers this quarter. This will bring down the house.
The big news of the day is KKR having difficulty in refinacing existing debt. This should also bring down the house.
Commercial paper continues to shrink as banks hoard paper bills. This is very deflationary and the Fed is extremely nervous about this.
Expect the Feds to lower interest rates by 1/2 a point in March.
Got to go.
Hope you enjoy the new format.