Saturday, June 26, 2010

commentary..June 26.2010

Good morning Ladies and Gentlemen:
 
Before commencing with this weekend's commentary, let me introduce you to 3 new members into the banking morgue:
 

Bank Closing Information – June 25, 2010

These links contain useful information for the customers and vendors of these closed banks.

High Desert State Bank, Albuquerque, NM 
First National Bank – GA, Savannah, GA 
Peninsula Bank, Englewood, FL

http://www.fdic.gov/

end.
 
On Monday, we will get a closer look at the cost to the FDIC on these closures.
 
I also sent to Chairman Gensler of the CFTC a complaint on his inaction in solving the silver and gold manipulation.
 
Here is my letter writen to him on June 24.2010
 
Dear Chairman Gensler:
 
We are now closing in on 3 months since the hearing and there has been no Public decision put forward by your committee.
 
We have provided enough evidence to suggest that J.P.Morgan and their banking Associates have been manipulating the silver market daily with the full knowledge
 
of the CFTC regulators.
 
No bank would continue with such activity unless they were given the clear signal that no action would be taken against them.
 
J.P.Morgan has accumulated over 30% of the entire short position on the Comex and I feel that all metal investors, both domestic and international, deserve to know why you do
 
not see this as manipulative.  It is also closing in on 2 years since we were made aware of this manipulation through the Banking Participation Report of August 2008.  This is an extremely
 
long period of time where silence has been the order of the day as the regulators appear to be in a quandry of what they should do.
 
The siilver Comex seems to be in turmoil with massive amounts of physical silver metal leaving the Comex for reasons unknown.  This would not be so alarming under normal circumstances,but with such a huge
 
short position, this must cause you sleepless nights and for us investors shaking our heads with bewilderment.  We are hearing countless stories of delays in the delivery of investor's silver metal.
 
The President of the USA, President Obama promised us transparency but that is now what we are getting.
 
Regulators are hiding behind the veil that JPMorgan has hedges over in Europe but these hedges are not physical metal.  This implies that paper hedges are being used to cover physical delivery committments.
 
This has the capacity to overwhelm the banks such as J.P.Morgan with horrific fallout for the American people and global financial markets.  The BIS data seems to suggest that the forwards i.e. the short positions
 
in silver represent over 4 and 1/2 years of silver production and J.P.Morgan cannot have a long position over in England.  The data at the BIS which monitors the risks to the G10 banks suggests a massive
 
shortfall by JPMorgan and HSBC.
 
Please explain to all of us how this accumulation of a massive short position is not manipulative.
 
I urgently await your answer.
 
Harvey B Organ
 
BScPhm MBA.
 
 
OK let us begin with the big physical metal events of the day.
 
Gold closed up by a cool $10.50 breaking into new record territory on all currency levels.  The silver price skyrocketed past the resistance level of 19.00 dollars to close at $19.11 up by
 
38 cents. The Canadian gold price per oz finished the day at $1301.00 a record for this currency/gold price.
 
The open interest on the gold comex continues to baffle our banking cartel.  The reading at 1:30 yesterday was a gain of 6228 contracts to 599,460.  The silver comex OI actually fell again by
 
1511 contracts to 135,634.
 
As I have commented to you on many occasions, an OI of around 600,000 is very unstable as the bankers see this as a potential problem if many will stand for delivery instead of rolling to a future
month.  I would like to point out that this reading is basis Thursday night.  For Friday's reading we must wait until Monday.  However given the huge volume and price rise of gold on Friday, you can be
sure that the OI rose above the 600,000 mark.  I would also like to point out that we have reached this record level of 600,000 and yet we still have another month to go until August deliveries commence.
 
It is surprising that the OI on silver fell. This must be related to all the turmoil at the silver comex as huge amounts of silver is leaving the customer inventory. They must be afraid that too many are standing for silvery and there is just no silver available, as well as the potential for commingly.  I will be reporting on this issue throughout the next 35 days.
 
The number of oz that are standing for silver so far for July is 24409 contracts or 122 million oz. I expect around 6000 contracts to remain or about 30 million oz.  All eyes will be on June 30.2010
 
Before going into the delivery notices at the comex yesterday, we also received the Committment of traders report which is basis Tuesday, June 22.2010.
 
 
In both gold and silver all players continued to stand behind their respective army lines.
 
First gold:
 
The large speculators who are long gold contracts (hedge funds/sovereign wealth funds etc) increased their long positions by a huge 10,263 contracts.
 
The large speculators who think that the gold market is too frothy increased their shorts by a smallish 1880 contracts.
 
And now here is where the fun begins:
 
The large commercials  (swap funds, miners, and intermediate bankers) increased their long positions in gold by a rather large 8449 contracts.
These swap funds are bankers who are close to the physical markets.  The intermediate bankers sense trouble.
Also mining entities are also accumulating gold metal or holding onto their mined metal a little longer than usual
 
 
The large commercials (large banks such as JPMorgan and HSBC) INCREASED THEIR SHORT POSITION BY A WHOPPING:   18421 contracts.
 
Even the small speculators got into the action:
The small speculators that were long increased their positions by a rather large 7444 contracts.
The small speculators who generally get it wrong increased their short positions by  a healthy 5855 contracts.
 
In a nutshell:
 
large speculators bought the paper gold and JPMorgan and cohort HSBC continually supplied the unbacked gold  paper.
The regulators, as I indicated in my complaint letter to Gensler remain silent on the issue.
 
Now for silver:
Now we shall go to silver where we see the same situation developing:
 
The large silver speculators increased their long positions to the tune of a huge 3202 contracts.
 
The large silver speculators that were short and also think that the silver market is a bit too frothy added to their short positions by a very tiny 667 contracts.
 
(The large speculators that were long, certaintly were instrumental in the silver rise this past week)
 
And now, our famous banker commercials:
 
The commercials that were long silver continued again this week adding another 1340 contracts to their long position.
 
However the large commercials that have been supplying the silver paper all this time; (JPMorgan, HSBC, Scotia Mocotta) increased their shorts by another massive 3,135 contracts.
 
The small speculators this week finally put their toes into the water:
 
The small speculators that were long increased those positions by a small 718 contracts.  Those small speculators that were short, became bold and increased their shorts by a rather
 
large 1458 contracts.  These guys always get it wrong so I am very bulllish that silver will skyrocket and break these small  speculators.
 
 
On that topic let us explore the gold and silver deliveries at the comex.
 
As I pointed out to you on Thursday, the July silver comex contract went off the board and all options exercised are given silver contracts.
We will get that data on June 29.2010.
 
For silver:  5  options were exercised for metal or 25000 oz.  The number of silver oz standing for the month of June is 225000 oz.
 
I would also like to report that another 283,669 oz left the customer inventory.  As I pointed out to the Chairman of the CFTC that there is turmoil
in the comex pits.
 
As for gold there were 40 deliveries or 4000 oz of gold. The number of notices issued as of Friday night total:  20756 or  2,075,600 0z of gold.
 
The total number of contracts that remain to be serviced totals  267 or 26700 oz of gold.
 
The total number of oz standing for this delivery month of June is 2,075,600 +  26700 oz left to be served + 204,000 (options exercised in May)=   2,306,300
(slightly higher than yesterday)  The tonnage in gold is 74.4 tonnes.
 
Ed Bugos who is great statistican revealed last night that the potential for a commercial failure at the gold and silver comex is rather high.
 
Here is this commentary: from the Golden Truth..Dave Kranzler:
 

We are not too far away from a run on Comex gold or a Comex delivery default:

Investors took delivery of 39% more Gold from Futures expiring on the Comex than Investors did during the same period last year—further, our sources continue to suggest that June deliveries could wipe out near 80% of Dealer Inventory and the situation in Silver remains much the same

 
end.
 
As for our two physical ETF's  CEF.a and PHYS, both registered good premiums to NAV:
 

CEF closed with a premium to NAV of 7.7% (Wednesday 6.6%) and PHYS 11.147% (10.598%).

As well, our famous GLD added another 3 tonnes of gold inventory courtesy of the Bank of England:
 
The GLD ETF reported adding 3.04209 tonnes to 1316.17663 tonnes .  (courtesy of John Brimelow).
 
As I pointed out to you on many occasions, the Bank of England has engaged in a swap deal with the GLD folk.  The GLD gets gold belonging to the Bank of England and the GLD folk deposit dollars
to an account at the Bank of England.  The Bank at any time, and they will, ask for the gold back in this swap and the dollars will go back to the GLD.  However the money has not advanced in value in the 6 years
of GLD life,
whereas gold has advanced.  The shareholders of GLD will get stuffed.
 
.
 
 
The Mint continues to mint massive gold and silver eagles.  Here is a report from Ed Steer on the numbers coming from the Mint:
 
 the U.S. Mint had some more sales to report... and they are as follows.  Another 10,000 ounces of gold disappeared into the gold eagle program... along with 4,000 24-k gold buffaloes.  The also reported selling a smallish 46,000 silver eagles.  Month-to-date... 132,500 ounces of gold has disappeared in the gold eagle program... along with 31,500 24-k gold buffaloes and 2,533,500 silver eagles.
 
end
 
The silver eagle sales have slowed down somewhat probably due to their lack of silver blanks. The gold program is still going gangbusters.
Remember that the usa must use all usa sources first in the minting of usa gold and silver coins
 
Here is a story from Mineweb where the author shows how China is secretly accumulating gold metal :
 

Now China sources newly mined gold from the USA

The latest news from Coeur d'Alene Mines on its sale of gold concentrates on a long term contract to the Chinese has to be seen as yet another positive for the gold price.

Author: Lawrence Williams
Posted:  Friday , 25 Jun 2010 

FUNCHAL - 

We are now used to China sourcing huge volumes of metals from external sources to drive its industrial machine forwards, but the latest announcement from Coeur d'Alene Mines on its deal to have its gold concentrates purchased and processed by China's largest gold producer suggests that precious metals are on China's vast shopping list too.

China is already the world's largest gold miner, and many analysts now assume - following the country's announcement last year that it had been building up its gold reserves for six years unknown to the West - that it is still expanding its gold holdings in  a way that does not necessarily show the gold going into official reserves.  And now it appears to be looking elsewhere to purchase supplies of the yellow metal without overtly impacting the market.

What is significant, perhaps, is that this suggests that China's commitment to gold is both ongoing - and likely to increase.  The country, through its financial institutions and state television advertising, has been persuading its ever growing middle classes to purchase gold (and silver) as a good investment.  There seems little doubt that the state is doing the same thing itself as a means of diversifying its huge reserves.

Coming back to the Coeur deal - as my colleague Dorothy Kosich noted in her article today on the company's new Kensington mine in Alaska (Coeur Mines' controversial Kensington Alaska gold mine now a reality), "The gold concentrates produced at Kensington will be processed by China's largest gold producer China National Gold through an agreement that is the first of its kind between a state-owned corporation of the People's Republic of China and a U.S. precious metals mine.........China Gold will be paying upfront, which means that in terms of timing, Coeur will get paid seven days after shipping vs. the typical two-three months that most concentrate producers must wait, while the metal is being processed at the smelter/refinery."

This is obviously a very attractive deal for Coeur, speeding up its cashflow, although it covers a relatively small amount of gold for the Chinese - but the very fact that this has been put into place suggests that other similar deals are likely to be negotiated with other new producers going forwards.  It also means that China's appetite for gold just cannot be satisfied by its still growing domestic gold mine output - as we noted above already the world's largest.

If indeed it is China's plan to increase its gold holdings, but while maintaining an orderly market in the yellow metal, it is a smart move.  The main reason, almost certainly, that China did not buy the IMF gold on offer - or even a large hunk of it - would be that to do so would have sent a very overt signal to the market and that the gold price would have skyrocketed as a result.  Such a movement in the price might have been seen on global markets as a vote of no confidence in the dollar - and with China's huge dollar-related foreign exchange holdings this would not suit its long term economic policy either.

To buy newly-mined gold production at source is thus a clever ploy.  It is not interfering with the gold market directly by being seen to buy, but picking up gold which is actually never reaching the market.  It can then move the gold into some interim holding capacity which does not have it showing up in its official reserves until, and unless, it wishes to make this statement to the markets.   The fact that, as a result, less gold is actually reaching the market has a substantially smaller impact on it than the overt purchasing of bullion itself.

The move has to be seen as long term bullish for the gold price and is yet another way of limiting downside risk for gold investors.  GATA has for a long time been railing against what it sees as gold price suppression by the gold banks and governments, but probably none of this has the potential impact for control of the gold market which can be, and probably is being, exerted by the Chinese - but because this is broadly positive for gold  it may not be in that organisation's interests to comment yet it is an equally manipulative policy if indeed it is in effect!

 
 
end.
 
That ends the physical part of my commentary.  Now to the big economic stories of the day.
 
Some of you have asked for the Baltic Dry Index graph.  I pointed out to you the huge drop in the index as this portends trouble in the economy.
This index is generally an accurate predictor of how the economy is turning:
 

S here is the graph >


Chart courtesy of Ron Griess, The Chart Store

end.
 
I pointed out to you this week the resignation of Peter Orszag as he could not persuade Obama to curb expendictures.
It looks like there will not be a 2011 budget.
 
Here is this Financial times report (from Zero Hedge)
 

FT Reveals Orszag Resigns Over Inability To Persuade Summers And Obama Keynesianism Leads To Suffering

Tyler Durden's picture




As we speculated previously, the sudden and unprecedented departure of Peter Orszag, the day prior to the US Budget's formalization (which incidentally never happened as now the US will likely not have a 2010 budget at all, for fear of disclosing to most Americans just how broke the country is ahead of mid-terms) was due to Orszag's disagreement with the administration's, and particularly Larry Summer's, inability to fathom that reckless spending is a recipe for bankruptcy. As the FT reports: "Peter Orszag, Barack Obama’s budget director, resigned this week partly in frustration over his lack of success in persuading the Obama administration to tackle the fiscal deficit more aggressively, according to sources inside and outside the White House." And so, as any remaining voices of reason realize they are dealing with a group of deranged Keynesians, soon there will be nobody left in the administration who dares to oppose the destructive course upon which this country has so resolutely embarked, which ends in one of two ways: debt repudiation, or war. And with the only remaining economic "advisers" being the trio of Summers, Romer and Geithner, you know America will somehow hit both of these mutually exclusive targets.

More from FT:

Mr Orszag, whose publicly stated reasons for leaving were that he was exhausted after years in high pressure jobs and also that he wanted to plan for his wedding in September, is seen as the guardian of fiscal conservatism within the White House.

Other members of Mr Obama’s economic team, notably Lawrence Summers, the head of the National Economic Council, have placed more emphasis on the need for continued short-term spending increases to counteract what increasingly looks like an anaemic economic recovery in the US.

Although Mr Orszag agrees with the need to push short-term spending, particularly in the Senate, which again this week failed to pass a measure extending insurance to the unemployed, the budget director has become increasingly frustrated with the administration’s caution on longer-term fiscal restraint.

Mr Orszag, whom Mr Obama has dubbed a “propeller-head” because of his brilliant facility with projections and spreadsheets, has tried but failed to convince his colleagues to “step up the action”, according to one insider.

In particular, he has collided with the political team, led by Rahm Emanuel, Mr Obama’s chief of staff, over Mr Obama’s 2008 election pledge not to raise taxes on any households earning less than $250,000 a year – a category that covers more than 98 per cent of Americans.

Economists say that would put all the fiscal emphasis on draconian – and highly unrealistic – spending cuts, or else pushing the marginal tax rates on the very rich to confiscatory levels. “Peter feels strongly that this is a pledge that has to be broken if the President is to take a lead on America’s fiscal crisis,” says an administration official not authorised to speak on the matter.

And after Barney Franks's disastrous appearance earlier on, where the market did a shot and an uptick for every lie uttered, we can safely say that this bankrupt country truly deserves all of its elected individuals.

 
end.
 
Here is a story where 46 states have budget deficits.  It looks like California and Illinois are complete basket cases and the harm to the global economy will be worse than the Greek crisis:

States of Crisis for 46 Governments Facing Greek-Style Deficits 
By Edward Robinson – Jun 25, 2010

Californians don’t see much evidence that the worst economic contraction since the Great Depression is coming to an end.

Unemployment was 12.4 percent in May, 2.7 percentage points higher than the national rate. Lawmakers gridlocked over how to close a $19 billion budget gap are weighing the termination of the main welfare program for 1.3 million poor families or borrowing more than $9 billion in the bond market. California, tied with Illinois for the lowest credit rating of any state, is diverting a rising portion of tax revenue to service debt, Bloomberg Markets magazine reports in its August issue.

Far from rebounding, the Golden State, with a $1.8 trillion economy that’s larger than Russia’s, is sinking deeper into its financial funk. And it’s not alone.

Even as the U.S. appears to be on the mend — gross domestic product has climbed three straight quarters — finances in Arizona, Illinois, New Jersey, New York and other states show few signs of improvement. Forty-six states face budget shortfalls that add up to $112 billion for the fiscal year ending next June, according to the Center on Budget and Policy Priorities, a Washington research institution. State spending is 12 percent of U.S. GDP.

“States are going to have to cut back spending and raise taxes the same way Greece and Spain are,” says Dean Baker, co- director of the Center for Economic and Policy Research in Washington. “That runs counter to stimulating the economy and will put a big damper on the recovery in the latter half of this year.”

More…

 
end.
 
The following is a big story, the failure to pass extended benefits leaving masses without money starting next week.  The Fed will just print more money somehow:
 

Jim Sinclair’s Commentary

Look at this oxymoron.

There will be no extensions of unemployment benefits based on supposed austerity, but the Federal Government will fill the state’s shortfalls with Federal money.

No extension for unemployment benefits. 
A third attempt by the Senate to pass an extension to unemployment benefits failed to win the 60 votes needed for cloture, as lawmakers showed increasing concern about the country’s fiscal position. As a result, the bill will be shelved and 1.3M unemployed will lose their unemployment assistance by the end of the week. The move will also leave several states with large budget holes they had expected to fill with federal money.

ShareThis

 
end.
 
Looks like we may get an audit the Fed bill.  I am not holding my breath.  Here is this commentary:
The article is from the American free press:
 
GREAT NEWS: the Senate committee that is currently working on a compromise Wall Street reform bill to reconcile with the House version has agreed to expand an audit of the privately owned and controlled Federal Reserve.

While still not a total probe of the Federal Reserve System, the measure is being sold as a first step toward complete transparency of the U.S. central bank. Both the Senate and the House have already passed legislation that is intended to rein in the casino-like behavior on Wall Street. However, these two bills are noticeably different and have to be worked out in committee.

The House’s version would mandate multiple audits of the Fed’s discount windows and open market dealings, which would shed light on the Federal Reserve’s lending activity with U.S. and foreign banks. On the other hand, the Senate’s bill calls for only one audit.

Legislators are now hard at work on a compromise bill that addresses the disparities.

According to published reports, senators in committee have agreed to allow repeated audits of the Fed’s key functions. This will finally give the American public a window into how the central bank works to benefit the “banksters” themselves.

No one knows the exact details yet. But populist Americans are optimistic that whatever comes out of committee is going to impact the speculators and traders on Wall Street, who have driven the U.S. economy to the brink of collapse.

One online commentator remarked on the bill: “The details of the final proposal are still being worked out, but momentum is with advocates of Federal Reserve transparency.”

That is good news.

But even better news is the fact that, according to a new analysis by one of the largest banks in the world, the proposed Wall Street reforms will cost Wall Street as much as a quarter of its annual profits.

Citigroup reports that Goldman Sachs could lose as much as 23 percent of its profits when financial reform passes. Morgan Stanley could lose nearly 20 percent. JP Morgan is facing a hit of 18 percent, and Bank of America could see up to 16 percent of its gains disappear over night.

The losses are attributed to increased regulations that will force financial firms to cough up more of their own money to back the bets they make. There are also a host of new fees and taxes that will go in effect, which the
money trust will have to pay.

Subscribe to American Free Press. Online subscriptions: One year of weekly editions—$15 plus you get a BONUS ELECTRONIC BOOK - HIGH PRIESTS OF WAR - By Michael Piper.

Print subscriptions: 52 issues crammed into 47 weeks of the year plus six free issues of Whole Body Health: $59 Order on this website or call toll free 1-888-699-NEWS .

Sign up for our free e-newsletter here - get a free gift just fo
r signing up! http://www.americanfreepress.net/html/email_newsletter.html

(Issue # 27, July 5, 2010)

Please make a donation to American Free Press

Not Copyrighted. Readers can reprint and are free to redistribute - as long as full credit is given to American Free Press - 645 Pennsylvania Avenue SE, Suite 100 Washin
gton, D.C. 20003

http://www.americanfreepress.net/html/audi
t_the_fed_227.html
 
end.
 
 
 
I thought this comment from Fed Governor Fischer of the Dallas Fed alarming:
(for those wishing the entire speech click on )

 

 
Subject: 'Storms on the Horizon' - Richard Fisher Speech - FRB Dallas 28 May 08

 

Richard W. Fisher is president and CEO of the Federal Reserve Bank of Dallas.

 

NOTHING MEANINGFUL HAS BEEN DONE TO ADDRESS FISHER'S CONCERNS OF TWO YEARS AGO !

 

I see a frightful storm brewing in the form of untethered government debt. I choose the words—“frightful storm”—deliberately to avoid hyperbole. Unless we take steps to deal with it, the long-term fiscal situation of the federal government will be unimaginably more devastating to our economic prosperity than the subprime debacle and the recent debauching of credit markets that we are now working so hard to correct.

 

It is only natural to cast about for a solution—any solution—to avoid the fiscal pain we know is necessary because we succumbed to complacency and put off dealing with this looming fiscal disaster. Throughout history, many nations, when confronted by sizable debts they were unable or unwilling to repay, have seized upon an apparently painless solution to this dilemma: monetization. Just have the monetary authority run cash off the printing presses until the debt is repaid, the story goes, then promise to be responsible from that point on and hope your sins will be forgiven by God and Milton Friedman and everyone else.

 

We know from centuries of evidence in countless economies, from ancient Rome to today’s Zimbabwe, that running the printing press to pay off today’s bills leads to much worse problems later on. The inflation that results from the flood of money into the economy turns out to be far worse than the fiscal pain those countries hoped to avoid.
 
Earlier I mentioned the Fed’s dual mandate to manage growth and inflation.
In the long run, growth cannot be sustained if markets are undermined by inflation. Stable prices go hand in hand with achieving sustainable economic growth. I have said many, many times that inflation is a sinister beast that, if uncaged, devours savings, erodes consumers’ purchasing power, decimates returns on capital, undermines the reliability of financial accounting, distracts the attention of corporate management, undercuts employment growth and real wages, and debases the currency.

 

 

Richard W. Fisher

 
 
end.
 
 
I think I have covered the essential stories for this week.  I will cover in detail the silver delivery situation as it develops.
 
I will cover any earth-breaking stories from our G20/G8 meetings in Toronto this weekend.
 
I wish everyone a grand weekend.
 
all the best
Harvey

Thursday, June 24, 2010

commentary..June 24.2010

 
Good evening Ladies and Gentlemen:
 
Sorry for being a little late, as I had a meeting to attend.
 
Today gold rebuffed a blatant manipulation attempt in order to  prevent option holders of gold and silver from winning on their bets on this last day of trading.
 
Gold finished the trading day and the last day of options trading at $1245.50 up by $11.20 .  Silver finished the day in fine fashion up by 25 cents to 18.73.
 
The gold comex OI fell by 9000 contracts to 593,232.  The silver comex OI fell by 1874 contracts to 137146.  Gold and silver fell yesterday on the raid so this is
 
quite normal.  However I have my suspicion that the figure is too low.  We will see if OI rises well above 600,000 tomorrow  (tonights official reading).
If it did, the bankers will burn the midnight oil as they try and figure out how to combat the massive physical demand for silver and gold.
 
 
I would like to go straight to the deliveries and inventory movements at the silver comex and gold comex:
 
Here is a chart of the days events:
 
 
 
 
 Silver
Withdrawals from Dealers Inventory   614126 oz
Withdrawals from customer Inventory   N/A
Deposits to the dealer Inventory  N/A
Deposits to the customer Inventory  330,457 ozoz
No of oz served  zero  
No of oz to be served xxx
Gold
Withdrawals from Dealers Inventory   200
Withdrawals from customer Inventory   161
Deposits to the dealer Inventory  N/A
Deposits to the customer Inventory  N/A
No of oz served  79  7900  oz
No of oz to be served  244  24400 oz
COMEX Warehouse Stocks June 24, 2010
 
Comments:
 
There is a further comex announcement of a transfer of 140,000 oz of silver from the dealer and into the customer silver inventory.
 
The 330,457 oz of deposit will balance some of the withdrawal of the dealer inventory.  The real amount of dealer silver inventory depleted is thus
 
140,000 oz +  614,126 oz =   754,000 oz or 3/4 of a million oz.
 
We are witnessing massive withdrawals at both ends of the silver inventory namely the dealer inventory and the customer.
Today it was a big drainage from the dealer inventory.
 
There were no additional options exercised in silver.  Thus we end the cycle for June silver at 200,000 oz and I will use this number in all calculations
on the front delivery month of July for silver.
 
Let's go to gold:
 
Again paltry movements out of gold.  This is extremely surprising as this is the second largest delivery month of the year for gold and we are not seeing any movement into the dealer inventory.
 
Now we shall see how the delivery notices shape up:
 
There were 79 notices received or 7900 oz.
Thus the total number of notices received so far is represented by the number:  20,514 notices or 2,051,400 oz of gold.
 
The number of contracts left to be served equates to 24400 oz of gold.
 
Thus the total number of oz of gold standing for June is as follows:
 
2,051,400  +  204,000 +  24400 =   2,279,800  or 73.5 tonnes of gold.
 
The comex gave us faulty data yesterday.  The tonnage of 73.5 is identical to Tuesday's number.
 
This number should stand for the rest of the month.
 
Since gold traded above 1200.00 all gold contracts above 1200 dollars is in the money and this will be very interesting to see how many option holders stand
for delivery.
 
In silver, any silver option holder is in the money with contracts above a strike price of 18.70.
 
 

Now we shall proceed to the big economic stories of the day:

 

The jobless number came in as expected, down by a tiny 19000 from last week:

 

WASHINGTON (Reuters) - The number of workers filing new applications for unemployment insurance fell slightly more than expected last week, offering hope the fragile economic recovery remained intact.

Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 457,000 in the week ended June 19, the Labor Department said on Thursday. The decline in claims was the largest since the week ended April 17.

 

 

end.

 

As many of you know I follow the Baltic Dry Index and this has been a pretty good predictor of how the economy is faring.

This measure is simply the cost of moving dry goods  (not oil) on a ship across the oceans of the world.  If the price is rising, then commodity prices are rising and

the economy is improving.  If the ships are empty  (rates falling badly as no cargo) then the economy is in real trouble.

 

Today the Baltic dry index has fallen from 4209 on May 29.2010 to 2515 today for a loss of 40% in less than a month.  This is a major red flag that the economy is imploding

badly.  Stay tuned on this one!!

 

Deutche Bank seems to tag along Angela Merkel in stating that the usa financial scene is in a mess:

 

from Jim Sinclair's jsmineset.com;

 

jim Sinclair's Commentary

Back towards crisis levels.

How about to worse than recent crisis levels in this Ski Jump Virtual Recovery.

Deutsche Bank: U.S. Financial Conditions Just Collapsed Back To Crisis Levels 
Vincent Fernando, CFA | Jun. 24, 2010, 5:36 AM

Deutsche Bank has a new and improved index of U.S. financial conditions, and this index just slumped back towards the lows of our recent crisis.

Deutsche Bank's Peter Hooper:

Financial conditions appear to have worsened substantially in recent quarters based on our update of the broad index of US financial variables presented earlier this year at the US Monetary Policy Forum. In the wake of recent developments in Europe, increased stress in financial markets has pushed that index halfway back to its immediate post- Lehman crisis lows.

clip_image002

The index is built from an array of financial indicators such as U.S. treasury yields, the volatility index (VIX), the stock market, Broker-Dealer leverage, among others. It's a bit of a black box, but it's calculation is giving a similar reading to what we saw during the worst of the financial crisis.

More…


 

end.

 

I pointed this out to you on the weekend.  The levels of methane gas in the gulf is rising to extreme levels and taking vital oxygen out of the water.

 

Here is this report:

 

Methane in Gulf "astonishingly high": U.S. scientist

(Reuters) – As much as 1 million times the normal level of methane gas has been found in some regions near the Gulf of Mexico oil spill, enough to potentially deplete oxygen and create a dead zone, U.S. scientists said on Tuesday.

Texas A&M University oceanography professor John Kessler, just back from a 10-day research expedition near the BP Plc oil spill in the gulf, says methane gas levels in some areas are "astonishingly high."

Kessler's crew took measurements of both surface and deep water within a 5-mile (8 kilometer) radius of BP's broken wellhead.

"There is an incredible amount of methane in there," Kessler told reporters in a telephone briefing.

In some areas, the crew of 12 scientists found concentrations that were 100,000 times higher than normal.

"We saw them approach a million times above background concentrations" in some areas, Kessler said.

More…

end.

 

Is something brewing here?  Look what Bank of America is doing re the housing mess:

 

from Jim Sinclair:

Bank of America Boosts Staff Handling Troubled Loans 
By David Mildenberg – Jun 23, 2010

Bank of America Corp., the second- largest U.S. home lender, added 2,000 employees since April to work with borrowers having trouble paying their mortgages, a senior executive said.

The lender now has more than 18,000 workers in "default management," a 60 percent increase since January 2009, Barbara Desoer, president of Bank of America's home-loan and insurance unit, said in testimony prepared for a congressional hearing on U.S. housing policy tomorrow. Those workers handle 100,000 calls a day, she said. Wells Fargo & Co., the largest U.S. home lender, Bank of America and other companies have hired thousands of employees or shifted staff from other departments to work with borrowers who have lost jobs or experienced declining incomes. Banks repossessed a record 257,944 homes in the first quarter, 35 percent more than a year earlier, according to Irvine, California-based RealtyTrac Inc. More than a fifth of U.S. mortgage holders owed more than their homes were worth, Seattle- based real estate data provider Zillow.com reported last month.

"Given the depth of the nation's recessionary impacts on homeowners, a considerable number of customers will transition from homeownership over the next two years," Desoer said in the testimony. "We must compassionately and responsibly help those customers who have exhausted all their options and can no longer afford to stay in their homes."

Handling More Calls

Bank of America, based in Charlotte, North Carolina, handles almost 14 million home loans, or about one of every five U.S. mortgages, more than any other U.S. servicer, Desoer said. Payments on 1.4 million loans are more than 60 days late, she said. Investors or government-sponsored entities such as Freddie Mac and Fannie Mae own most of those loans and pay servicers fees to handle billing and collection.

More…

 

end.

 

And this article by Ambrose Pritchard Evans on the faltering USA economy:

 

Ben Bernanke needs fresh monetary blitz as US recovery falters

Federal Reserve chairman Ben Bernanke is waging an epochal battle behind the scenes for control of US monetary policy, struggling to overcome resistance from regional Fed hawks for further possible stimulus to prevent a deflationary spiral.

 

By Ambrose Evans-Pritchard, International Business Editor
Published: 9:44PM BST 24 Jun 2010

 

Fed watchers say Mr Bernanke and his close allies at the Board in Washington are worried by signs that the US recovery is running out of steam. The ECRI leading indicator published by the Economic Cycle Research Institute has collapsed to a 45-week low of -5.7 in the most precipitous slide for half a century. Such a reading typically portends contraction within three months or so.

Key members of the five-man Board are quietly mulling a fresh burst of asset purchases, if necessary by pushing the Fed's balance sheet from $2.4 trillion (£1.6 trillion) to uncharted levels of $5 trillion. But they are certain to face intense scepticism from regional hardliners. The dispute has echoes of the early 1930s when the Chicago Fed stymied rescue efforts.

"We're heading towards a double-dip recession," said Chris Whalen, a former Fed official and now head of Institutional Risk Analystics. "The party is over from fiscal support. These hard-money men are fighting the last war: they don't recognise that money velocity has slowed and we are going into deflation. The only default option left is to crank up the printing presses again."

Mr Bernanke is so worried about the chemistry of the Fed's voting body – the Federal Open Market Committee (FOMC) – that he has persuaded vice-chairman Don Kohn to delay retirement until Janet Yellen has been confirmed by the Senate to take over his post. Mr Kohn has been a key architect of the Fed's emergency policies. He was due to step down this week after 40 years at the institution, depriving Mr Bernanke of a formidable ally in policy circles.

The Fed's statement this week shows growing doubts about the health of the recovery. Growth is no longer "strengthening": it is "proceeding". Financial conditions are now "less supportive" due to Europe's debt crisis.

The subtle tweaks in language have been enough to set bond markets alight. The yield on 10-year Treasuries has fallen to 3.08pc, the lowest since the gloom of April 2009. Futures contracts have ruled out tightening until well into next year.

Yet the statement may understate the level of angst at the Board. New home sales crashed 33pc in May to an all-time low of 300,000 after the homebuyer tax-credit expired, confirming fears that the housing market has been propped up by subsidies. Unemployment is stuck at 9.7pc. Manufacturing capacity use is at 71.9pc. The Fed's "trimmed mean" index of core inflation is 0.6pc on a six-month basis, a record low.

"The US recovery is in imminent danger of stalling," said Stephen Lewis, from Monument Securities. "Growth could be negative again as soon as the fourth quarter. There is no easy way out since fiscal stimulus has already been pushed as far as it can credibly go without endangering US credit-worthiness."

Rob Carnell, global strategist at ING, said the Obama fiscal boost peaked in the first few months of this year. It will swing from a net stimulus of 2pc of GDP in 2010 to a net withdrawal of 2pc in 2011. "This is very substantial fiscal drag. On top of this the US Treasury is talking of a 'Just War' against the banks, which will further crimp lending. It is absolutely the wrong moment to do this."

Kansas Fed chief Thomas Hoenig dissented from Fed calls for ultra-low rates to stay for an "extended period", arguing that loose money risks asset bubbles and fresh imbalances. He recently called for interest rates to be raised to 1pc by the autumn.

While he has been the loudest critic, he is not alone. Philadelphia chief Charles Plosser says the Fed has blurred the lines of monetary and fiscal policy by purchasing bonds, acting as a Treasury without a legal mandate. Together with Richmond chief Jeffrey Lacker they represent a powerful block of opinion in the media and Congress.

Mr Bernanke has fought off calls from FOMC hawks for moves to drain stimulus by selling some of the Fed's $1.75 trillion of Treasuries, mortgage securities and agency bonds bought during the crisis. But there is little chance that he can secure their backing for further purchases at this point. "He just has to wait until everybody can see the economy is nearing the abyss," said one Fed watcher.

Gabriel Stein, from Lombard Street Research, said the US is still stuck in a quagmire because Mr Bernanke has mismanaged the quantitative easing policy, purchasing the bonds from banks rather than from the non-bank private sector.

"This does nothing to expand the broad money supply. The trouble is that the Fed does not understand broad money and ascribes no importance to it," he said. The result is a collapse of M3, which has contracted at an annual rate of 7.6pc over the last three months.

Mr Bernanke focuses instead on loan growth but this has failed to gain full traction in a cultural climate of debt repayment. The Fed is pushing on the proverbial string. The jury is out on whether or not his untested doctrine of "creditism" will work.

"We are now walking on deflationary quicksand," said Albert Edwards from Societe Generale.

 

end.

 

 

My commentary on Saturday will be lengthy as I will review banking failures, the COT report and the Comex inventory levels as well as big economic stories of the day.

 

see you on Saturday.

Harvey

 

Search This Blog

Loading...