Gold closed down by $12.00 to $1174.00 and silver joined suit falling by 36
cents to 18.30.
The whole world was rocked with this announcement:
Dubai Debt May Be Higher Than $80 Billion, UBS SaysNov. 27 (Bloomberg) --
Dubai, the Persian Gulf emirate whose state-run companies are seeking to
defer debt payments, may owe more than the $80 billion to $90 billion in
liabilities assumed by investors, UBS AG
debt includes sizeable off-balance sheet liabilities that imply a total debt
burden well above the $80 billion to $90 billion markets have estimated so
far," Dubai- based real estate analyst Saud
nis&sort=date:D:S:d1> Masud wrote in a note. "This could imply that the debt
issued by Dubai in recent weeks is insufficient to meet upcoming
redemptions."...http://www.bloomberg.com/a
pps/news?pid=20601087&sid=aXGrvyOI6IWs&pos=3-END-
I have been reporting now for over a year that Dubai and its flagship state
owned real estate Dubai World was in deep trouble. We reported on empty
buildings and bridges leading to nowhere.
There were reports on buildings abandoned and many expatriates leaving their
cars at the airport never to return.
The losses to the banking sector will be huge. The citizens of the UK are
now the proud owner of much real estate in Dubai courtesy of its ownership
of Royal Bank of Scotland.
It is rumoured that the credit default swaps written on Dubai total around
600 billion dollars so this will again drive a nail through the heart of
the banking industry.
The big underwriters of this will be the insurers like AIG, and Ambac and
of course of favourite bank, JPMorgan.
You will see a lot of cross contamination from this default in the days to
come.
I would also like to report that Dubai has little oil compared to its more
conservative sister Abu Dhabi. Most of the oil in the United Emirates comes
from Abu Dhabi.
Here is Dave Kranzler's commentary on Dubai:
Friday, November 27, 2009
Eyes
The quick answer to that question is that we don't have enough information
to make a real assessment. We know that the Dubai World fund is looking to
restructure payment terms on $80 billion in debt. Dubai World is an
investment vehicle owned by the Dubai Government.
That's the devil we know. The devil we don't know is to what extent Dubai
World has off-balance-sheet liabilities. Even more consequential, we don't
know to what extent banks and hedge funds globally have engaged in Credit
Default Swaps tied to the debt issued by Dubai World. Like every other
financial accident that has happened - and the bigger ones waiting to happen
- the OTC derivatives abortion has the potential to magnify the damages by
many multiples and to inflict damage in places where we we least expect it
(i.e. U.S. investment and pension funds).
We also know that going back to Long Term Capital and Enron, when smoke
started billowing from these entities, it didn't take long for those firms
to disappear, incinerated by hidden, off-balance-sheet nuclear landmines.
The long list of financial firms that followed, often vaporized overnight,
included Bear Stearns, AIG, Washington Mutual, Lehman, Wachovia and many
hedge funds.
JP Morgan is out with a report that the U.A.E. has plenty of money available
to bail out Dubai. That may be the case and this crisis may blow over as
quickly as it surfaced. But these sovereign bailouts, led by the
multi-trillion dollar U.S. bailout schemes, will eventually become
ineffective, drown out by the flood of money printed in order to make them
happen.
One thing I do know, all the anti-gold critics and media morons have been
quick to point out that gold was sold off hard and thus was not performing
as a flight to quality instrument. What I would like to point out is that
gold has actually rebounded 4% off of its overnight lows and is unchanged
from where it was trading for most of the day on Wednesday (albeit a bit
below Wednesday's close). No doubt gold was affected by the knee-jerk
reaction of hedge funds who piled into gold's upward momentum and other
weak-handed holders. Hedge funds tend to sell anything not nailed down at
the first sign of downside volatility, and this would include gold futures
thereby exaggerating gold's sell-off.
Quite frankly, in the context of the dollar spike and the hard sell-off in
stocks globally, I think gold is holding its own quite well. Keep your eyes
wide open to what is happening in Dubai. Not so much for what is obvious,
but for the collateral effects that might not filter out thru CNBC,
Bloomberg News, et al. The event that triggers the next huge cliff-dive in
global equity markets is likely to come out left field with little or no
warning. Did anyone expect to wake up yesterday to see European bourses down
3-4% on the news of potential debt default from Dubai?
***
And then this story courtesy of Bloomberg and printed in the Wall Street
Journal:
Dubai Woes May Reach 'Sovereign Default,' BofA Says
Nov. 27 (Bloomberg) --
may worsen to become a "major sovereign default" that roils developing
nations and cuts off capital flows to emerging markets, Bank of America
Corp. said.
"One cannot rule out -- as a tail risk -- a case where this would escalate
into a major sovereign default problem, which would then resonate across
global emerging markets in the same way that Argentina did in the early
2000s or Russia in the late 1990s," Bank of America strategists
nnis&sort=date:D:S:d1> Benoit Anne and
tfields=wnnis&sort=date:D:S:d1> Daniel Tenengauzer wrote in a report.
A default would lead to a "sudden stop of capital flows into emerging
markets" and be a "major step back" in the recovery from the global
financial crisis, they wrote.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=HUI&sid=167
94&time=8
-END-
After the market closed, the CFTC ( the Nymex) released results on trading
in gold and silver.
I would like to give you my interpretation on what is reporting to us. I
would like to add that the
data has been very bad lately. I will do my best!
First let me give you Gold:
For those wishing to see the results yourself go to
www.nymex.com and press on gold and silver
and then press settlements.
Gold Futures
Quotes |
Contract Specifications |
Performance Bonds / Margins |
Product Calendar |
More
*
Quotes
*
*
Volume
* Settlements
About
this Report
Futures
|
Options
Trade Date
Friday, November 27 2009 Wednesday, November 25 2009 Tuesday,
November 24 2009 Monday, November 23 2009 Friday, November 20 2009
Daily Settlements for Gold Futures (FINAL)Trade Date: 11/27/2009
Month Open High Low Last Change Settle Volume Open
Interest
DEC 09 1192.8 1195.0 1130.1 1177.8 -12.8 1174.2 112,679
44,366
JAN 10 1192.7 1195.5 1139.1 1177.0B -13.0 1175.0 4,354 804
FEB 10 1194.6 1196.8 1135.8 1176.0 -13.1 1175.5 277,413
341,601
APR 10 1195.5 1197.5 1132.0 1180.4 -13.0 1176.8 4,514 45,352
JUN 10 1192.2 1199.0 1139.2 1180.8 -13.0 1177.9 3,130 20,772
AUG 10 1194.2 1198.8 1150.1 1179.1 -13.0 1179.1 198 11,379
OCT 10 1200.2 1200.3 1167.0 1177.7 -13.1 1180.3 32 3,894
DEC 10 1200.5 1200.5 1145.1 1179.5 -13.2 1182.0 1,433 22,928
FEB 11 - - - - -13.3 1184.3 - 2,833
APR 11 - - - - -13.3 1186.8 925 1,733
JUN 11 - - - - -13.5 1189.6 1,000 7,869
AUG 11 - - - - -13.7 1192.9 - 265
DEC 11 1201.0 1207.1 1181.0 1203.6 -14.1 1200.9 61 11,598
JUN 12 - - - - -14.6 1215.2 - 4,393
DEC 12 1250.0 1250.0 1250.0 1250.0 -15.1 1232.7 11 8,555
JUN 13 - - - - -15.7 1252.5 - 727
DEC 13 1282.0 1282.0 1282.0 1282.0 -16.3 1273.7 6 2,442
JUN 14 - - - - -16.9 1296.6 - 586
Total 405756 532097
Last Updated 11/27/2009 07:00 PM
Market
data explanation/disclaimer
end.
Lets go over the salient points:
1. Note that the open interest rose yesterday from 521213 to 532097 for a
gain of 10884.
2. The OI gain is basis Wednesday night and is accurate. (supposedly)
3, This is important: they always give OI figures 24 hrs after the fact.
Because Thursday was a holiday, we got in on Friday
afternoon but it is for Wednesday night's final figures!
4. Please note the ESTIMATED volume figure for Friday gold trading:
405756.
5.They always undestimate this figure by 20% so the final tally will
probably be 450,000 or greater.
Now it gets interesting:
6. Note the OI for Dec 09 at 44356. It is probably accurate but remember
that this is basis Wednesday night.
7. However note the huge volume for Dec 09 trading at 112679 which is almost
3 times Dec 09 OI.
8. No doubt that these are options that were exercised into a contract and
traded or rolled to a future month.
9. Since these contracts are given to option traders there is no purchase
side so the sale or roll is one sided.
By this, I mean in the volume side of things, there is no purchase side due
to options exercised, only the sale side.
10. Thus options exercised contract total around 68000 or 6.8 million oz. We
get this figure by subtracting 112679 from 44356.
1l. There is no difference in price btw a Dec 09 contract and a Feb 10
contract, so I doubt if any of the trading in
dec 09 were day traders. You can safely say that the 68000 contract trading
in the Dec 09 was options exercised
and rolled into a Feb.10 or later month
12. There was probably 20% of options exercised that will stand for a Dec
09 gold contract and that figure
will be in Monday's OI report. (remember we are always 24 hrs after the
fact)
13. Thus expect around 20,000 contracts from Options exercised to be
included in OI on Monday.
14. Thus add 20,000 plus 44,345 and you get 64345 contracts standing.
15. Generally, on the last day we see 30,000 contracts rolling.
16. Thus expect 34,345 contracts to stand and that could cause a comex
default.
OK lets go to silver:
Silver Futures
Quotes |
Contract Specifications |
Performance Bonds / Margins |
Product Calendar |
More
*
Quotes
*
*
Volume
* Settlements
About
this Report
Futures
|
Options
Trade Date
Friday, November 27 2009 Wednesday, November 25 2009 Tuesday,
November 24 2009 Monday, November 23 2009 Friday, November 20 2009
Daily Settlements for Silver Futures (FINAL)Trade Date: 11/27/2009
Month Open High Low Last Change Settle Volume Open
Interest
DEC 09 18.845 18.900 17.700 18.240 -.466 18.302 29,225 10,386
JAN 10 18.820 18.820 17.720 18.290B -.466 18.314 1,353 351
MAR 10 18.900 18.950 17.720 18.335 -.465 18.335 49,292 86,651
MAY 10 18.775 18.895B 17.745 18.380 -.465 18.355 736
9,589
JLY 10 18.735 18.740 18.025 18.320 -.465 18.372 123 7,075
SEP 10 18.120 18.480 17.970 18.415 -.465 18.388 62 2,603
DEC 10 18.980 19.000 17.815 18.350 -.465 18.415 664 9,357
JAN 11 18.000 18.000 18.000 18.000 -.465 18.424 1 1
MAR 11 18.620 18.620 18.620 18.620 -.466 18.442 1 48
MAY 11 - - - - -.467 18.460 - -
JLY 11 18.690 18.690 18.690 18.690 -.468 18.479 1 2,860
SEP 11 - - - - -.469 18.498 - -
DEC 11 18.800 18.800 18.100 18.480 -.470 18.527 243 5,162
JLY 12 - - - - -.473 18.610 - 846
DEC 12 - - - - -.475 18.650 - 170
JLY 13 - - - - -.488 18.721 - 103
DEC 13 18.900 18.900 18.900 18.900 -.498 18.775 5 290
JLY 14 - - - - -.498 18.904 - -
Total 81706 135492
Last Updated 11/27/2009 07:00 PM
end.
Note the small decrease in OI from 136162 to 135492 or a loss of 670. Thus
in gold we got an increase of OI and in
silver a decrease. Thus the commercials see a huge threat in silver and are
abandoning the ship in greater numbers.
Again, note the rather large OI for Dec 09 at 10,386 but this is basis
Wednesday.
Note the large volume of trading for Dec 09 at 29225 which is again options
exercised for a Dec 09 contract.
Probably around 19000 contracts were exercised and rolled into a March
contract.
maybe around 5000 option exercised contracts remain and stand for
delivery.This must be added to the 10,386 standing
Probably 3000 contracts will leave the last day, thus:
Looks to me like there will be around 12,000 contracts for silver or 60
million oz.
The comex claims that it has 102 million oz. This one will be close.
Here are two reports on gold and silver trading so you can compare what I
have been reporting to you on: (op-ex means options exercise day)
First from Dave Kranzler:
Today's Action in the Metals
Opex was Monday. The big position in Dec calls was 1200. Those were most
likely not exercised. Hard to say how many in the moneys would have been
exercised and held w/a stop vs. exercised and sold right away to book the
profit.
The selling in gold could easily have been hedge funds shooting first, then
asking questions about the Dubai thing. I have yet to find anyone with a
view about the significance or potential collateral damage associated with
this Dubai thing.
In terms of gold, I'm looking forward to seeing the size of the o/i after
today's session. That will tell us a lot about what is going on in terms of
longs vs. comex cartel.
At any rate, in terms of the number of contacts in the money and exercised
and held after Monday's opex, it was a significant number in relation to the
volume we're seeing today in the December cart.
and this from Adrian Douglas:
There are still 94,544 contracts of OI in DEC gold which is very high this
close to first notice day. Just 20% of these standing for delivery would
wipe the COMEX dealers out of all their gold. There are still 20,816
contracts of OI in DEC silver; It would require 50% of the silver open
interest to stand for delivery to clean out the dealers so gold is certainly
the one to keep a close eye on as there is only 1 trading day before first
notice day in the December contract.
Another day and another record high. Has anyone seen the cartel's cavalry?
M.I.A.! Every short is underwater and every long is making money. And new
highs were made in the ACCESS market. What a way to go into a Thanksgiving
holiday. By Monday there will be a lot less turkey birds, but there will be
a heckuva a lot more turkeys in the gold world! Is there a Law of
Conservation of Turkeys? No! There should be, because we are going to need
it next week! Happy Thanksgiving everybody!
Cheers
Adrian
Please note when Adrian wrote this they did not update the Dec OI until
late in the day!
On Wednesday night, Dave Kranzler commented on a possibility of a default at
the comex:
(Note that he expected volume to be light on Friday. so did I and boy were
we surprised)
Wednesday, November 25, 2009
Is
A commercial signal failure occurs in the commodities market when the amount
of demand for physical delivery of a commodity - in this case gold - exceeds
the ability to physically deliver the available supply by those obligated to
deliver. In this case that would be the parties who have sold short the
Comex December gold futures contract (primarily Goldman Sachs, JP Morgan,
HSBC and Deutsche Bank). If this does indeed occur, the price of gold and
silver will do a veritable moon-shot in price.
The situation in December gold on the Comex could get quite interesting. As
of today's trade date, there are 94,544 open December gold futures
contracts. Anyone holding one of those contracts who does not or can not
take delivery (1 contract = 100 ozs, or roughly $118,000) of Comex gold
needs to have that postion sold by the end of trading Friday. Tomorrow the
Comex is closed and Friday will be a low volumn day. The reason for this is
that Monday is what is known as "first notice day," which means that anyone
long a gold contact (or silver) can be tagged with a delivery notice.
Now, the amount of gold being reported by the Comex as "registered" (not
that we trust that number) - which is the amount that is available for
delivery - is a little over 2.1 million ozs. If o/i (open interest) on
Monday is any where over 21,000 contracts (2.1 million ounces), December
could be a very interesting month for gold. In other words, if the open
interest at the close of trading Friday is greater than 21,000 contracts,
the Comex has a delivery problem. The price will go parabolic.
With the open interest at 94,000+ right now, and with Friday being a very
low volumn day, we can expect that the number of contracts that potentially
stand for delivery will far exceed the amount of gold available for
delivery. Now, contracts can be tendered for cash instead of gold, and
someone holding a contract can sell it after 1st notice day. But, anyone
holding after Friday must have an account fully funded to accept delivery
because, in theory, every single long position on Monday could be tagged
with a delivery notice (this never happens but theoretically it is
possible). We'll have to wait until Friday afternoon to know for sure, but I
suspect the relentless move up in gold prices this week are sniffing out the
possibility of a delivery issue as described above.
Two more interesting items of note, and events which confirm the growing
demand for physical delivery and possession of gold. First, it was announced
today that the Central Bank of Sri Lanka purchased another 10 tons of gold
from the IMF. They said it was a move to diversify reserves, which means
they are dumping U.S. dollars. Here's the link:
buy the rest of the IMF gold for sale:
It should be clear to anyone paying attention to what is going on in the
gold (and silver) market that there is an aggressive movement by central
banks, investment funds and wealthy individuals to take physical custody of
large quantities of gold. There is also a massive imbalance between the
actual supply of physical gold available for delivery and the enormous
amount of paper liabilities for gold. These liabilities include Comex
futures, OTC derivatives, leased gold and, of course, the high likelihood
that GLD is largely a massive gold leasing operation. The paper Ponzi scheme
in gold is starting to unravel and this is being reflected by the price
behavior in gold, despite tame inflation numbers coming out of the
Government.
Have a great Thanksgiving break - GOT GOLD?
end.
I will briefly discuss economic news:
This caught everyone for surprise as the week before commercial paper was on
the rise. I reported to you during this past wee, that M3 has had zero
growth and that treasury bills had negative yields.
And now a contraction on commercial paper, the lifeblood of the business
world or Main Street:
US commercial paper market shrinks in latest week-Fed
NEW YORK, Nov 27 (Reuters) - The U.S. commercial paper market contracted in
the latest week, Federal Reserve data showed on Friday, adding to hints that
a three-month expansion of the market might be stalling amid a feeble
economic recovery.
It was the third weekly contraction in four weeks. For the week ended
Wednesday Nov. 25, the size of the U.S. commercial paper market, a vital
source of short-term funding for companies' daily operations, fell by $10.7
billion to $1.257 trillion outstanding.
-END-
This is not good: utilities are asking for rate increases because of rising
costs. The poor consumer:
23:46 Utilities across US request rate increases - WSJ
The article specifically cites Northeast Utilities System (NU), Xcel Energy
(XEL), Duke Energy (DUK), and Pepco Holdings (POM), and says that to
generalize, utilities are seeking returns on equity of 10.5-11.5%.
* * * * *
The usa mint has now stopped all production on USA eagle silver coins and
gold as they cannot come up with supply:
Gold rush forces U.S. to clip Eagle sales
Submitted by cpowell on 03:03PM ET Thursday, November 26, 2009. Section:
Daily Dispatches
Financial Times, London
Thursday, November 26, 2009
http://www.ft.com/cms/s/0/393e551e-daaa-11de-933d-00144feabdc0.htmlThe rush
by retail investors into gold has forced the US government to suspend sales
of the world's most popular bullion coin, the American Eagle, after running
out of inventories.
The shortage, the second since the start of the financial crisis in August
2008, is the latest sign of investors seeking a safe haven into bullion amid
the US dollar woes. Safe-haven buying spurred by concerns about the health
of Wall Street and a spike in inflation due to a lax monetary policy have
also benefited gold sales.
"The US Mint has depleted its current inventory of 2009 American Eagles
one-ounce bullion coins due to the continued strong demand," the mint said
in a statement late on Wednesday. It added that selling will resume "once
sufficient inventories ... can be acquired to meet market demand."
The stoppage helped to push gold prices yesterday to a fresh all-time high
of $1,194.90 a troy ounce, up 0.5 per cent on the day. Bullion later pared
gains to trade at around $1,185 a troy ounce as the US dollar strengthened.
The mint suspended sales last year after the collapse of Bear Stearns and
Lehman Brothers triggered a wave of buying that depleted its stocks. Coins
dealers have reported ocassional shortages of other popular coins.
Philip Newman, director at London-based precious metal consultancy GFMS,
said that physical gold demand in North America had picked up in the last
two months.
The US Mint has sold about 1.19m ounces of American Eagles so far this year,
up almost 75 per cent from the same period last year and on track to be the
highest annual volume in ten years, according to official data. Sales of
American Eagle silver coins have hit 26 million ounces, the highest level in
at least 23 years.
Although gold and silver coins account for a relatively small fraction of
the precious metals market, analysts see them as a good proxy of retail
investor appetite.
Gijsbert Groenewegen, managing director at New York-based precious metals
hedge fund Silver Arrow Capital, said that investors were shifting from
paper assets to physical assets. "Bullion is the only asset without
counterparty risk," he said.
The scarcity of American Eagle coins ahead of the Christmas-period, which
usually sees strong demand for bullion, pushed coins premiums higher.
FideliTrade, a major US-based coins bullion dealer, quoted the American
Eagle at almost $60 above spot gold prices, much higher than quotes for
other coins.
Traditionally, the American Eagle and its sister, the American Buffalo, are
the world's best-selling gold coins, followed by the the Canadian Maple
Leaf, the Austrian Philharmonic, and the South African Krugerrand.Turkey's
local gold coins sell even more that its American counterpart but trade is
limited to within the country.
* * *
Here are some numbers for the abbreviated session on the NYSE:
US Treasuries were as the yield on the 10 yr T note fell to 3.21%.
At post time...
The dollar only rose .19 to 75 on the nose.
Crude oil is down $1.33 per barrel to $74.90.
The CRB fell 5.47 to 272.94.
The DOW was last down 146 to 10,318 and the DOG was off 29 to 2146.
end.
I would like to leave you with this letter from a silver and gold trader to
Bart Chilton commissioner of the CFTC,
It is self explanatory:
Further to my letter of the 11Nov. 2009
Dear Mr. Chilton,
I was a little disappointed that you had not acknowledged my letter to you
on 11th Nov.I realise you are busy but it would be nice to at least know you
were taking my information into consideration and looking into the questions
I raised.
You must be aware of the concentrated positions evidenced in your own
published data. This information has most certainly been in your hands for a
year now. Since that time the concentration has increased to record levels.
I realise that you inherited this criminal situation BUT THIS IS NOW
HAPPENING UNDER YOUR WATCH.
As you know I am a metals trader based in London and am fully aware how JP
Morgan et al is able to move the silver market at will. Indeed I am able to
profit from such activity as we are given clear signals by them when they
intend to instigate a sell off. If you cared to contact me I would be able
to give you information on just how these signals work. You may wonder why I
would want to expose such a profitable activity? It is because I want to
trade in a fair market and think of my profession as honourable. I believe
all human beings should act with integrity and when I look around in church
on a Sunday realise that I am deceiving and robbing ordinary hard working
god fearing human beings.
It makes me very uncomfortable to stay silent as I witness traders I know
profiting from insider information. It is bad enough that a so called
respectable bank is allowed to act in a criminal manner but I suggest you
check into and audit the personal positions traders acting for a 'certain
bank' take around the orchestrated sell offs.
I have been asked questions on how traders can justify such large bonuses
this year. I think the press will have a field day now that these questions
come into focus. Especially when we make them aware that it is not just
through legal trading, and that the CFTC is fully aware this is going on.
You and I know that JPMorgan is acting as an agent for the Federal Reserve.
It is common knowledge to all professional traders. I can only deduce that
your lack of action in tackling this blatantly obvious manipulation because
your hands being tied due to pressure from above. The CFTC's lack of action
is threatening to blow up the precious metals market.
This brings me to my main concern. Do you realise that the massive short
paper positions are HANGING BY A THREAD? There is simply not enough physical
metal available for delivery for the December delivery contract.
Over this Thanksgiving we saw another supposedly marked to market Derivative
position blow up causing ripples through the market. Yet this default is
just a fraction of what is threatened within 4 weeks in the physical market.
I have been just one more voice trying to warn you this is going to end
badly no matter how much you are reassured by JPMorgan the positions are
hedged. All they can do is now take a MASSIVE risk in adding to the short
positions in order to instigate a selloff. Unfortunately Gold will not
oblige in assisting this telegraphed action. Are you willing to allow this
king of risk to escalate?
Please acknowledge my letter.
Respectfully yours
Andrew T. Maguire
Silver remains one of the most rigged markets in history. The CFTC should be
ashamed of itself. The way things are going, silver isn't going anywhere
until JP Morgan's silver position blows up ... which could come at any time
in the weeks and months ahead.
Monday will be a huge day as we face first day notice on both silver and
gold.
I will report as usual, on Monday night when all the data is in.
It is only then, that I can get a true picture of what is going on. However
judging from the attempted raid committed by our bankers, you
can safely say that they are in trouble.
I wish you all a grand weekend and see you on Monday
Harvey.
