Saturday, July 17, 2010

Commentary July 17.2010 --comex having increasing problems with silver and gold

Good morning to you all.
Before commencing the commentary I would like to introduce you to the latest entries into the banking morgue
Friday nights activity was very busy with 6 bank closures.  They were in Michigan, Florida and South Carolina.

Failed Bank List

Bank Name




Closing Date


Mainstreet Savings Bank, FSB Hastings MI 28136 July 16, 2010
Olde Cypress Community Bank Clewiston FL 28864 July 16, 2010
Turnberry Bank Aventura FL 32280 July 16, 2010
Metro Bank of Dade County Miami FL 25172 July 16, 2010
First National Bank of the South Spartanburg SC 35383 July 16, 2010
Woodlands Bank Bluffton SC 32571 July 16, 2010
Gold closed lower yesterday to the tune of $19.40 to 1188.20.  Silver fell by 58 cents to 17.77.  Yesterday was options expiry for shares
as well as the all important GLD.  The orders were given by the Obama administration to whack gold and silver and prevent in the money
exercising on the GLD. 
The gold comex OI continues to rise inspite  of the continual raids by the bankers.  It rose again yesterday (basis Thursday) by  3212 contracts
to 574,196.  The silver comex is behaving differently, it fell by a tiny fraction 96 contracts to 118,482. 
I will now proceed to the Committment of Traders report which is of course basis last Tuesday.
In gold:
the large speculators that were long decreased their positions to the tune of 7409 contracts. Those large speculators that were short
gold decided to lighten up on the trades to the tune of 3,286 contracts.
In the commercial category, those commercials that have been long, decreased those positions by a healthy 4980 contracts.
The large commercials that have been always short finally decreased some of those shorts to the tune of 5774 contracts.
There was little change in the small specs.
Thus in summary we got some improvement in the gold positions as many covered.
In silver:
Those large speculators that were long reduced some of those positions to the tune of 700 contracts.  Those large speculators that were short,
reduced some of those positions by 838 contracts.
And now the all important commercial sector:
those commercials that were long increased those longs by 975 contracts.  Those that were short , JPMorgan and HSBC  reduced marginally those shorts to the tune of
178 contracts. The small specs again were not in the game.
The Banking participation report for June was released on Friday and the report is quite staggering.
Here is Ed Steer on this:

I'm going to take a few minutes of your time and walk you through the July Bank Participation Report.  This report shows how many banks [both U.S. and foreign] are long and short the various markets... plus how many Comex contracts they are long and short.  Silver and gold are the two commodities that are of interest here.  Here's the link to the July report... with silver and gold being about two thirds of the way down the page... and it's ever so simple to follow... and I mean it.

In silver you will notice that 'X' number of U.S. bullion banks are long 257 Comex contracts and short a whopping 31,803 Comex contracts. As the numbers show... the 257 long contracts represent 0.2% of total Comex silver open interest which is stated here as 118,962 contracts.  The 31,803 short contracts represents 26.7% of total open interest.

But what the silver numbers doesn't say is how many U.S. banks hold those positions.  The CFTC used to publish them, but once Ted Butler discovered the Bank Participation report and started to write about it, the bullion banks screamed bloody murder, so the CFTC changed the report so that if there are less than 4 U.S. banks holding either a long or short position... the number is not shown.  They don't show the number of non-U.S. banks either, because if they did... by the process of subtracting that from the total number of banks involved, you could figure it out all by yourself, dear reader... and we mustn't have that now, must we?

From past historical BPR data, the number of U.S. banks has pretty much always been two... and I see nothing in these numbers that indicate that this has changed.  I can also pretty much say that 95% [or more] of that 31,803 Comex contracts held short... is held by JPMorgan... and the other 5% [or less] is most likely held by HSBC USA.  So if you subtract 0.2% from 26.7%... you will see that JPMorgan and HSBC are short 26.5% of the entire Comex open interest in silver... and if you take out all the market-neutral spread trades... that shoots the percentage to well over 30% of the Comex silver market that is held short by these two banks.  Any questions so far?

Looking at the six [8-2=6] non-U.S. banks' Comex silver positions... they hold 2,284 long positions and 614 short positions... for a net long position of 1,670 Comex contracts.  This represents 1.9%-0.5%=1.4% of the total Comex open interest in silver.

Two U.S bullion banks are net short 26.5% of the total Comex open interest in silver... and 6 Non-U.S. banks are net long 1.4% of the total open interest.  Who controls the silver price on the Comex, dear reader.

I'll leave gold up to you... which is a couple down from silver.  There are 4 U.S. bullion banks here, so they show all the numbers.  But even a cursory glance shows that the 4 U.S. bullion banks are net short 137,756 Comex contracts in gold [13.77 million ounces]... which represents 23.8% of the entire gold open interest on the Comex.  And I'll bet you dollars to doughnuts, dear reader, that 95% of that 13.77 million ounces is held short by Morgan and HSBC.  The 14 non-U.S. bullion banks are net short a whole 6,253 Comex contracts... which is 1.1% of total Comex open interest.

So, once again, 23.8% of the entire Comex open interest in gold is held short by two U.S. banks... the other two banks are virtually immaterial.  But 14 non-U.S. banks are net short 1.1% of the total Comex open interest.  Who controls the price?

This is a JPMorgan operation from one end to the other.  But in all fairness, JPMorgan is only the executioner.  They receive the order to swing their axe from either the Federal Reserve, the U.S. Treasury... or both.  It's as simple as that.  Then the boyz at Morgan pick up the phone, call the other bullion banks, set up the date and time... and then collectively pull the trigger... just like they did yesterday... and July 1st.  That's all there is, dear reader... there's no more to it then that.

As you can see, JPMorgan and HSBC control over 26.5% of the silver comex market and 23.8% of the gold comex.  And our regulators who have been given more power, let these guys control both markets.

The fact that these regulators allow this kind of criminal behaviour is beyond me!!
I am now going to the all important comex silver and gold inventories and notices to deliver:
Withdrawals from Dealers Inventory   ZERO oz
Withdrawals from customer Inventory   923,430 oz
Deposits to the dealer Inventory  N/A
Deposits to the customer Inventory  N/A oz
No of oz served  8  40000 oz
No of oz to be served  707 3.5 million oz
Withdrawals from Dealers Inventory   Zero
Withdrawals from customer Inventory   127 oz
Deposits to the dealer Inventory  N/a oz
Deposits to the customer Inventory  N/a oz
No of oz served   31  3100 oz
No of oz to be served xxxxx oz

COMEX Warehouse Stocks July 16, 2010.



Notes:  there was a massive 923,430 0z of silver removed from the customer inventory in silver

again no silver was added or withdrawn from dealer inventory.


There was a total of only 8 contracts served upon very patient longs.  The total for yesterday was a very small 40,000 oz of silver served.

The total no of contracts served upon the longs so far this month total 1869 contracts or 9.3 million oz.

The total remaining to be served total 707 contracts or 3.5 million oz.


The total no of oz of silver standing this delivery month of July is as follows:

9.3 million oz (already served) + 3.5 million (waiting to be served) + .2 million oz (options exercised in June)=  13.0 million oz.


In gold:

In alarming fashion no gold has entered the gold comex vaults. A measly 127 oz of gold was withdrawn.  ( I understand 100 of those oz

but have a hard time understanding the 27 oz.....the  minimun bar is 100 oz ,so it is very difficult to explain the remaining 27 oz).

Yesterday saw another  31 contracts exercised for gold metal or 3,100 oz of gold.

The total number of gold exercised in this non delivery month of July total 694 contracts or 69400 oz of gold or 2.16 tonnes of gold.


In conclusion, we continue to see a massive exit of silver from the customer vaults.

I want to emphasize the small number of silver contracts that were served upon yesterday, ie 8 contracts.  It seems to me that word is getting around to the ultimate silver owners at the comex to vacate the mother ship.  It is also suprising that the bankers cannot get any other silver holders to lease their silver.

That will explain the massive exodus out of the comex.  A default at the silver comex looks eminent.  Silver will default first.





Rumours are flying that the Canadian Mint has stopped providing silver coins to investors.


From Ed Steer;

While on the subject of silver, my coin guy informed me yesterday that the Royal Canadian Mint is running  two to four weeks behind on virtually all of their bullion products right now... especially the 0.9999 silver Maple Leaf.  And, to top that off, Chris Powell sent me an e-mail from someone that had just contacted Kitco about purchasing silver coins and rounds... and this is the reply he got... "Good afternoon Sir/Madam, Thank you for your e-mail. Unfortunately, many of the Silver products we sell, are currently out of stock for Canadians. As such, the items are 'Only Shipping to the US '. Certain products are 'Only shipping to the US ' due to our inventory at our Vaults in Canada.  In other words our inventory is too low (depending on the item) to accept any new orders from Canadian or International customers. As such, we would simply have sufficient inventory to sell the items to US customer[s] as we also have Vaults located in the United States from where our products are also shipped. The product will be once again available, when we receive a new shipment of inventory.  In the mean time we suggest signing up for our 'Bullion Alert Service' which provides an e-mail notification as soon as a shipment arrives for the item(s) selected." Here's a link to Kitco's product page.  Except for the 1,000 ounce good delivery bar, they are completely out of all silver inventory for Canadian and international customers.  Only if you live in the USA is there anything available at all.




Now we shall discuss the major economic stories of yesterday.
In June, we commented that the Baltic Dry Index fell from 4200 to 2500 for a drop of almost 40% in two months.  Yesterday's release of the Baltic Dry Index at 1700 which shows the drop
at almost 60% in 21/2 months. 
The Baltic Dry Index always portends future economic contraction and  this is becoming very alarming. The index has been dropping steadily for 34 consecutive days.
The Dow fell by 260 points yesterday on news that the consumer sentiment numbered fell badly:

09:55 Univ. of Michigan Consumer Sentiment (Jul prelim) 66.5 vs. StreetAccount consensus 74.5

From Reuters:

NEW YORK, July 16 (Reuters) - U.S. consumer sentiment weakened in early July to its lowest in 11 months on a resurgence in fears about the economy, a year since the recovery began, a private survey released on Friday showed.

The reversal in consumer sentiment was dramatic after it reached its strongest level in nearly 2-1/2 years last month on hopes of better job and credit conditions, according to Thomson Reuters/University of Michigan's Surveys of Consumers.

The survey's preliminary July reading on the overall index on consumer sentiment plummeted to 66.5 from 76.0 in June. The figure was below the median forecast of 74.5 among economists polled by Reuters.

"Income and job prospects were extraordinarily weak and those bleak prospects have made consumers much more cautious spenders," Richard Curtin, director of the surveys, said in a statement.

This steep pullback in sentiment is ominous for the U.S. economy, which is already showing signs of slowing. Consumer spending accounts for some 70 percent of the U.S. economy.

The latest survey showed consumers' intention to buy durable items such as cars fell to its lowest in nine months.

"Moreover, consumers reported renewed weakness in the economy and were more likely to anticipate additional problems in the year ahead," Curtin said.

The survey's barometer of current economic conditions tumbled to 75.5 in early July, the lowest since November 2009.

This compared with 85.6 in June, which was the highest since March 2008. Analysts had predicted a figure of 84.0 for early July.

The survey's gauge of consumer expectations slid to 60.6, the lowest since March 2009. This compared with 69.8 in June, while analysts had predicted a reading of 68.4 in early July.

The measure on consumers' 12-month economic outlook deteriorated to 65.0 in early July, which was the lowest since April 2009. It stood at 79.0 in June.

In addition to worries about jobs and household finances, consumers expected inflation to pick up in the coming months.

The survey's one-year inflation expectations measure ticked up to 2.9 percent from 2.8 in June, while the five-to-10-year outlook index firmed to 2.9 percent from June's 2.8.







As many of you know, I follow the TIC report every month to give an idea of who will support the usa dollar.

Yesterdays reading was abysmal as both China and Japan decided to lighten up on their dollar holders.


First the official TIC report:  (from Reuters)


US net long-term capital inflows slips in May

NEW YORK, July 16 (Reuters) - Foreign investors reduced purchases of long-term U.S. securities in May, reining in their buying of U.S. government and corporate bonds, the Treasury Department said on Friday.

Net long-term capital inflows fell to $35.4 billion in May from a downwardly revised $81.5 billion inflow in April.

Net overall capital inflows into the United States, which include short-term securities such as Treasury bills, edged up to $17.5 billion in May from the prior month's $13 billion.

Buying of Treasury notes and bonds fell sharply, with foreigners snapping up a net $14.9 billion in May compared with $76.4 billion in April. China remained the biggest Treasury holder but saw its total stash slip by $32.5 billion.





The usa  has a trade deficit of about 40 billion usa dollars.  It also has a service sector deficit of about 15 billion dollars each month.  This is the minimum amount of dollars that must be financed by foreign entities to keep this fiat game alive.   Please note that capital inflows came in at 35 billion dollars well short of the mark needed.  The usa dollar will suffer badly as foreigners start to shun the usa.



The world is reacting to a few words placed in the beige book of the FOMC ie. the usa is comtemplating another round of quantitative easing.

I want to you to pay special attention to this Ambrose Pritchard Evans commentary on this subject and what it will mean to all of us:


Fed's volte face sends the dollar tumbling
By Ambrose Evans-Pritchard, International Business Editor
Published: 8:52PM BST 15 Jul 2010
London Telegraph

Rarely before have a few coded words in the minutes of the US Federal Reserve caused such an upheaval in the global currency system, or such a sudden flight from the dollar.

The euro rocketed to a two-month high of $1.29 and sterling jumped two cents to almost $1.54 after the Fed confessed that the US economy may not recover for five or six years. Far from winding down emergency stimulus, the bank may need a fresh blast of bond purchases or quantitative easing.

"The worm is turning," said David Bloom, currency chief at HSBC. "We're in a world of rotating sovereign crises. The market seems to become obsessed with one idea at a time, then violently swings towards another. People thought the euro would break-up. Now we're moving into a new phase because we're hearing alarm bells of a US double dip."

Mr Bloom said a deep change is under way in investor psychology as funds and central banks respond to the blizzard of shocking US data and again focus on the fragility of an economy where public debt is surging towards 100pc of GDP, not helped by the malaise enveloping the Obama White House. "The Europeans have aired their dirty debt in public and taken some measures to address it, whilst the US has not," he said.

The Fed minutes warned of "significant downside risks" and a possible slide into deflation, an admission that zero interest rates, $1.75 trillion of QE, and a fiscal deficit above 10pc of GDP have so far failed to lift the economy out of a structural slump.

"The Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably," it said. The economy might not regain its "longer-run path" until 2016.

"The Fed is throwing in the towel," said Gabriel Stein, of Lombard Street Research. "They are preparing to start QE again. This was predictable because the M3 broad money supply has been contracting for months."

The Fed minutes amount to a policy thunderbolt, evidence of how quickly the recovery has lost steam. Just weeks ago the Fed was mapping out withdrawal of stimulus.

Goldman Sachs said it expects the euro to rise to $1.35 by the end of the year. The yen will appreciate to ¥83, through the pain barrier for most of Japan's big exporters. The new twist is that SAFE, China's $2.4 trillion fund, has begun buying record amounts of Japanese bonds, a shift in reserve allocation away from the dollar.

The signs of a deep and sudden slowdown in the US are becoming ever clearer as the "sugar rush" from the Obama fiscal stimulus wears off and the inventory boost fades. California, Illinois and other states are cutting spending, tightening US fiscal policy by 0.8pc of GDP.

Thursday's plunge in the Philadelphia Fed's July index of new manufacturing orders to –4.3 suggests that the economy may have buckled abruptly, as it did in mid-2008. The Economic Cycle Research Institute's ECRI leading indicator has tumbled, reaching –8.3pc last week. This points to a sharp slowdown or recession within three months.

While US port data looked buoyant in June, the details were troubling. Outbound traffic from Long Beach fell from 139,000 containers in May to 116,000 in June. Shipments from Los Angeles fell from 161,000 to 155,000. This drop in exports is worsening the US trade deficit, eroding the dollar.

The US workforce has shrunk by a 1m over the past two months as discouraged jobless give up the hunt. Retail sales have fallen for the past two months. New homes sales crashed to 300,000 in May after tax credits ran out, the lowest since records began in 1963. Mortgage applications have fallen by 42pc to 13-year low since April. Paul Dales at Capital Economics said the "shadow inventory" of unsold properties has risen to 7.8m. "The double dip in housing has begun," he said.

Alcoa, CSX, Intel, and JP Morgan have reported good earnings, but they mostly did so in July 2008 just before their shares collapsed. Such earnings rarely catch turning points and can be a lagging indicator. Profits have been boosted in this cycle by cost-cutting, which is self-defeating for the economy as a whole.

The minutes confirm the Fed is split down the middle over QE. Fed watchers say the Board in Washington wants to be ready to launch another round of bond purchases if necessary, pushing the banks balance sheet from $2.4 trillion towards $5 trillion, but hawks at the regional banks are highly sceptical.

A study by the San Francisco Fed said the interest rates need to be –4.5pc to stabilise the economy under the Fed's "rule of thumb". Since this is impossible, massive QE needs to make up the difference.

Tim Congdon from International Monetary Research said the US authorities have botched policy response. "They are forcing banks to contract lending by raising their capital asset ratios. They have let M3 shrink by 1pc a month, as in the early 1930s. The solution is simple. The Fed must raise the level of deposits by purchasing bonds from the non-banking system as the Bank of England has done. They refuse to do it," he said.




The stock market decided yesterday that it was not enthused with the earnings of JPMorgan, Citibank and Bank of America.

It seems that JPMorgan;s profit was basically the halfing of the loan loss provisions on JPM's balance sheet.

Yesterday Citibank confirmed that the bankers will be in trouble this quarter.  Note that Citibank's earnings this quarter was a mere 9 cents. Here is there earnings report:


Citigroup Profit Falls 37% 
JULY 16, 2010, 8:56 A.M. ET
Citigroup Inc.'s second-quarter profit fell 37%, which was better than analyst estimates, as year-earlier results were heavily boosted by a $6.7 billion gain related to the combination of its Smith Barney brokerage operations with those of Morgan Stanley. 
Citi reported profit of $2.7 billion, or nine cents a share, down from $4.28 billion, or 49 cents, a year earlier. Revenue dropped 33% to $22.07 billion. 
"While the market environment lowered revenues in securities and banking, credit improved for the fourth consecutive quarter," Chairman and Chief Executive Vikram Pandit said. 
Shares fell 1.7% to $4.09 in premarket trading, even as loan-loss provisions shrank and profit at the company's Citicorp unit rose 17%, although revenue fell 1.1%. As of Thursday's close, the stock had risen 37% in the past year. 
In April the bank reported its strongest quarterly results in nearly three years as the fallout from the financial crisis settled down—a catalyst for improved results from most big banks. Citi has recently benefited from its ability to reduce its cost for bad loans and has been helped by an improving economy abroad. 


Here is a report on the JPMorgan's earnings:

JPMorgan's Q2 profit jumped 76% on a revenue decline to $25.6B (-9% q/q, -2% y/y) from $27.7B because JP Morgan continues to reduce loss reserves, this time by $6.3B (52%!!). Analysts from far and wide slammed the report and JP Morgan for its transparent earnings gambit.

Chris Whalen notes: Nearly half of JP Morgan's Q2 2010 EPS came from reduction in provisions and credit from UK bonus tax…Total assets declined 6% q/q and 1% y/y.

Only the natural tendency to peg stocks at key strike prices (40 for JPM), as well as the manipulation for expiration, kept JPM from a bigger loss…




The global sovereign debt keeps mounting..sooner or later the debt bubble will cause the economic collapse we are awaiting.


I really like this article from Jim Sinclair's comentary. The article is from CalculatedRisk:.  It is well worth reading:


Jim Sinclair's Commentary 
QE to infinity builds debt. 
How Large is the Outstanding Value of Sovereign Bonds? 
by CalculatedRisk on 7/08/2010 11:02:00 AM 
CR Note: Reader "some investor guy" has put together some data on sovereign default risk. This is the first in a series of posts. 
Debt issued by governments worldwide is immense. According to the Bank for International Settlements, at year end 2009 worldwide sovereign debt exceeded $34 trillion, and is greater than the amount of corporate bonds outstanding. 
Japan and the US dwarf most other borrowers. Together they have about half of all sovereign debt worldwide. Still, 23 other countries have over $100 billion of debt outstanding. The other 100+ countries worldwide have a total debt of about $1.4 trillion. 
Note: This graph shows the sovereign debt in December 2007 and December 2009. 
Due to the recession and increased expenditures to rescue banking systems, total sovereign debts grew by almost 30% in just two years. Sovereigns became the majority of worldwide debt. Several countries doubled their debts from 2007 to 2009 (BIS data). 



This next commentary from Jessie's cafe shows the dire consequences of a huge mortgage debt with falling property values:

A Blistering Ride Through Hell Key Property Charts to Make Sense of This Week's Housing Numbers and This Year's Financial Crisis 

Chart fromA Blistering Ride Through Hell by Michael David White.




Finally, I would like to highlight Mark Lundeen's great work on the balance sheet of the usa's Fed.


Note that the red line is now over 2.4 trillion dollars.

The green line is the usa dollars in circulation:  800 billion dollars

and the blue line, the entire portfolio of securities held by the fed  (which is basically toxic):


2.1 trillion dollars.


Ladies and gentlemen:  when this "blue stuff" leaves the banks and enters the general market,

hyperinflation will be upon us big time.

Here is this important graph to store in your minds:



Last night, I got this email from GATA.  It is a little alarming.  It is self explanatory:


Rust discovered on Bank of Russia-issued 'gold' coins


11:50p ET Friday, July 16, 2010

Dear Friend of GATA and Gold:

Zero Hedge reports tonight about Bank of Russia-issued gold coins that have been found rusting, which gold doesn't do.

Zero Hedge concludes: "The Central Bank of Russia has been one of the biggest purchasers of gold in 2010, having bought gold every single month. It would be embarrassing if it were discovered that not only is the bank diluting the gold content with oxidizable materials, but subsequently passing it off for .999-proof precious metal. And if this is happening in Russia, one wonder what trickery other central banks, with a far lower amount of gold in their vaults, resort to."

Now that it seems to be in a journalistic mode again, maybe Reuters should ask the Bank for International Settlements if its recent gold swaps have anything to do with those Bank of Russia coins. Another refusal to comment from the BIS would be especially delightful right now.

You can find the Zero Hedge report here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.




I guess that about wraps up the weeks gold and silver story.

I wish you all to have a grand weekend

and I will see you on Monday.



Friday, July 16, 2010

FW: [Harvey Organ's - The Daily Gold] FW:


my commentary will be important and will be out by 11 am Eastern Standard Time.

Posted By Harvey Organ to Harvey Organ's - The Daily Gold at 7/16/2010 07:51:00 PM



my commentary will be important and will be out by 11 am Eastern Standard Time.

Thursday, July 15, 2010

RE: [Harvey Organ's - The Daily Gold] FW: [Harvey Organ's - The Daily Gold] comme...



Good evening Ladies and gentlemen:
Gold closed today up by $1.10 to 1207.60.  Silver was also up by 7 cents to 18.35.
There seems to be a huge resistance for gold at 1218.00 per oz and silver at 18.50.
It is also interesting that GLD options expire tomorrow.  Although there really is no metal behind this vehicle, the cartel does not need to see a massive call option
turn into a possession of GLD and then turn that into an obligation to get metal.
Here are the puts and calls on GLD

Unlike the Gold and silver puts and calls, the dominate position here are the calls.  you will see that the huge concentration
of calls surround 1220.00.  You can be sure that gold will settle close to that level tomorrow.
The comex gold open interest continued to rise today (basis yesterday) closing at 570,094 a rise of 2,906 contracts.  Gold fell yesterday so that number is quite
surprising.  The silver comex OI rose by 629 contracts to 118,578 in complete sympathy with gold. The raid fooled nobody.
I would like to mention that the usa dollar continues to tank as the usa index finished the day down .86    at 82.51
The Euro rose big time today as news spread that the Spanish sold a 3 billion euro bond and had a 3:1 covering ratio. The euro closed at 1.2922
The Bristish pound continues to strengthen  closing at 1.5471 up by  1.86 pence.
Clearly the world is responding favourably to Euro's auster measure to fight the global financial imbalances.  The usa are heading for a second stimulus as its economy continues to falter.
As I pointed out to you yesterday the Fed's beige book kind of spelled out more QE.
This latest article from Jim Sincalir on this issue:

Fed eyes steps to bolster sputtering recovery 
Jul 14, 7:00 PM (ET) 

WASHINGTON (AP) – Federal Reserve officials cut their forecasts for growth this year and signaled they stood ready to take new steps to keep the recovery alive if the economy worsens.

A new document, released Wednesday, revealed a more cautious mood among the Fed policymakers in light of Europe’s debt crisis, a volatile Wall Street, a stalled housing market and high unemployment.

With risks growing, Fed officials at their June 22-23 meeting saw the need to explore new options for bolstering the economy. That’s a turnaround from earlier this year when they were moving to wind down crisis-era supports.

No new specific steps were disclosed or agreed upon at that time.

However, if the recovery were to deteriorate, Fed policymakers have options. They could revive programs to buy mortgage securities or government debt. They could lower the rates banks pay for emergency Fed loans. The Fed also could create a new program to spark more lending to businesses and consumers in a bid to lure them to ratchet up spending and grow the economy.



OK let us proceed to see the silver and gold inventories and the notices delivered:
Withdrawals from Dealers Inventory   Zero
Withdrawals from customer Inventory  471,597 oz
Deposits to the dealer Inventory  N/A
Deposits to the customer Inventory  N/Aoz
No of oz served  8  40000 oz
No of oz to be served  715 3.6 million oz
Withdrawals from Dealers Inventory   Zero
Withdrawals from customer Inventory  n/a
Deposits to the dealer Inventory  n/aoz
Deposits to the customer Inventory  64027oz
No of oz served  27  2700 ozoz
No of oz to be served xxxxxxx oz


COMEX Warehouse Stocks July 15, 2010
Again we see a massive drain of silver from the customer inventory to the tune of 471,597 oz.
As I have stated on many occasions, this is quite a story.  All silver owners are lining up and removing their silver from registered vaults.
Today we saw only 8 contracts served or 40,000 oz.  A huge number of 715 remain to be served. We have noticed, the last couple of days,
very few contracts of silver served upon.  This is due to scarcity of metal as the comex officials are panicking as they cannot find available silver.
To boot, customer silver is leaving by the boatload.  Also notice that we have not had any entries of silver in the dealer category for quite some time.
The total number of contracts served in silver total 1841 or 9.3 million oz.
The total number of silver standing for July is 9.3 + 3.6+.2 = 13.1 million oz.
In gold, again we see no gold enter the dealer inventory. However a customer
deposited 64000 oz of gold.
Today, we saw that 27 contracts were exercised for metal or 2700 oz of gold.
The new no. of gold oz standing for July stands at 66,300  (663 contracts)
I alerted you yesterday about Sprott's new silver fund.  This will put the nail in the coffin of JPMorgan.
Chris Powell of Lemetropolecafe and Zero Hedge comment:

Will Sprott's new silver fund become MorganChase's biggest nightmare?

Submitted by cpowell on 07:45AM ET Thursday, July 15, 2010. Section: Daily Dispatches

10:45a ET Thursday, July 15, 2010

Dear Friend of GATA and Gold (and Silver):

Zero Hedge has some encouraging words about the new Sprott Physical Silver Trust, whose taking "a few thousands tonnes of the precious metal out of circulation is sure to create quite a few sleepless nights for [JPMorganChase's] Jamie Dimon's precious metals manipulation club, which may suddenly find itself with a massive short position covered by even less actual deliverable, bringing the much-anticipated monumental short squeeze one day closer."

Zero Hedge's comments are headlined "Will Sprott's Brand New Physical Silver Trust Become JPMorgan's Biggest Nightmare?" and you can find them here:

It seems that the financial reform bill will pass tonight and it looks like the big winner will be the CFTC.
We will have to wait and see how this thing develops.  Here is this article on this subject. The author is Michael Crittenden of the Wall Street Journal.
How the CFTC Got Power

By Michael R. Crittenden and Victoria McGrane
The Wall Street Journal
Thursday, July 15, 2010

WASHINGTON -- With the Senate poised to approve the most significant overhaul in financial regulations in decades, the Commodity Futures Trading Commission is emerging as a winner.

The legislation likely to pass the Senate on Thursday would make the relatively small agency -- it employs only 600 -- the top cop for the $300 trillion U.S. derivatives market. CFTC Chairman Gary Gensler tenaciously lobbied for the agency, which was fighting for its life not long ago, and successfully tapped the CFTC's congressional overseers for their support.

The agency won a variety of items on its "wish list," including power to combat disruptive trading practices and more leeway to pay whistle-blowers. Most important, perhaps, lawmakers gave the agency freedom to interpret many of the rules it is charged with writing.

"They were the big winners," said Sen. Judd Gregg (R., N.H.), a member of the Senate Banking Committee.

The CFTC's new authority and Mr. Gensler's vision for derivatives regulation is causing anxiety for corporations. Critics are predicting higher costs for commercial firms and less liquidity in the swaps market.

Lawmakers, aides, and lobbyists involved in the bill say Mr. Gensler played an outsize role in shaping the new regime and was a constant presence during key moments in the legislative process.

During a grueling 20-plus hour negotiating session in late June, he hovered just behind lawmakers, and could be seen whispering to staff and negotiators as the House and Senate sought to iron out the 2,300-plus page bill.

Rep. Michael McMahon (D., N.Y.) said it was "a little unusual" to see Mr. Gensler conferring with lawmakers. But it wasn't new: Earlier this year, Mr. Gensler was on hand during a key Senate agriculture meeting to draft the derivatives bill.

"He was able to be on the Hill and explain it in layman's terms to lawmakers," said CFTC Commissioner Bart Chilton. "It was really helpful to have him up there, not just for meetings, but to be on call 24/7."

His influence was facilitated by the heads of the two agriculture panels, Sen. Blanche Lincoln (D., Ark.) and Rep. Collin Peterson (D., Minn.).

Mr. Gensler wanted to expand his agency's influence to deal with derivatives, one cause of the financial crisis. A higher-profile CFTC, meanwhile, would give Ms. Lincoln and Mr. Peterson an increased ability to influence financial policy and secure Wall Street campaign contributions. The agriculture committees have jurisdiction because of the heavy use of derivatives in agriculture.

"Once you have that power, the last thing you want to do is give it up," especially if it's a money maker for campaigns, said Meredith McGehee, policy director at the Campaign Legal Center, a nonpartisan campaign-finance advocacy group.

Ms. Lincoln's office said the CFTC is the agency best equipped to oversee derivatives. Mr. Gensler said that comprehensive regulation of the derivatives market is "essential to protecting the American public." Mr. Peterson's office didn't return a request for comment.

Mr. Peterson early on resisted colleagues' efforts to narrow the agency's scope. Both he and Ms. Lincoln argued that the CFTC, unlike other regulators, hasn't been tagged with failures in the run-up to the crisis.

Mr. Peterson, at a dinner last June with Treasury Secretary Timothy Geithner, said he opposed a CFTC-SEC merger.

Days later, the White House released its formal proposal that avoided the issue, proposing instead to "harmonize" regulation instead.

The effort to empower the CFTC continued up to the closing moments of negotiations. At the last minute, Ms. Lincoln sought to expand the range of firms the CFTC could oversee. A top Lincoln staffer, with Mr. Gensler standing over his shoulder, told lawmakers the senator was seeking a technical change. Her Senate colleagues were wary of a power-grab benefiting the agency.

"We're going to end up giving the CFTC broader jurisdiction than we intended to," countered an aide for Sen. Richard Shelby (R., Ala.), who sits on the Banking Committee.

Senate negotiators voted against her change, leading a visibly angered Ms. Lincoln and her staff to swarm Senate Banking Committee Chairman Christopher Dodd (D., Conn.) and his aides. "It was agreed to," Ms. Lincoln exclaimed to a top Dodd staffer, before threatening to blow up the fragile agreement.

"She doesn't want to sign the conference report," the banking-committee chief of staff told Mr. Dodd. "Oh, come on," Mr. Dodd groaned, burying his head in his hands.

At an impasse, staff from the Federal Reserve, SEC, CFTC and other top agencies trooped into a nearby Senate room to resolve the dispute. Minutes later, they agreed to alter the changes Ms. Lincoln had sought, giving her some but not all of what she wanted.

"The agency comes out in good shape," Mr. Chilton said. "We really have a lot to do in these markets -- and I think that's good because they gave us the tools to do that."

Reg Howe has written a commentary on the BIS gold swap with commercial banks.
Although we do not know the final outcome, he determines that it is bullish because the BIS put it in a foot-note and decided not to announce this publically.
His main contention was the gold remained in situ with a captive central bank or banks. Thus the gold deriviatives continue to multiply on that same amount of gold held.
The low value of 14 billion dollars in the swap signifies the swap was to settle a gold problem and thus tremendous stress in the gold lending as the commercial bankers (bullion banks) are finding the task
awfully difficult in finding metal.
Here is Reg's paper:

Reg Howe: BIS swaps seem meant to stretch out paper gold

Submitted by cpowell on 09:28PM ET Wednesday, July 14, 2010. Section: Daily Dispatches

12:25a ET Thursday, July 15, 2010
Dear Friend of GATA and Gold:

Reginald H. Howe of, plaintiff in the 2000 federal lawsuit against the Bank for International Settlements for gold market manipulation, analyzes the recent massive gold swaps undertaken by the BIS and figures that they are likely "the latest technique for giving official support to an increasingly shaky gold banking business," a way of "increasing the ratio of paper claims on gold to the underlying amount of available real metal." Howe concludes: "The growing reluctance of central banks to part with whatever gold they have left can only be a positive development for committed gold investors."

Howe's analysis is headlined "Gold Derivatives Update: BIS Swaps" and you can find it at the Golden Sextant here:

the following story was told by many websites today:

Higher education fund buys gold over economic worries

Copyright 2010 Houston Chronicle


The gold purchases represent only 3 percent of the University of Texas Investment Management Co.'s $22.3 billion in investment funds, but it indicates how deeply the fund managers are concerned about the global financial future.

With the state's endowment funds designed to generate a 5.1 percent distribution each year to the University of Texas and Texas A&M University, it is rare for the investment managers to put large sums of money into a commodity whose value usually only grows through inflation.

"Recently, we've added 3 percent, 3 percent of our portfolio, into gold as a protection against inflation, but even more as a lack of confidence in financial markets due to extraordinary government fiscal and monetary stimulus," UTIMCO CEO Bruce Zimmerman told the University of Texas board of regents Wednesday. "I wish I could tell you the future looked rosy. Unfortunately, that's not our view. At best, we believe the future is uncertain."

Other executives suggested the endowments have begun to recover from the staggering losses of 2008 and 2009.

UTIMCO manages investments for all UT system schools and for the Permanent University Fund, which provides money to both UT and A&M. Its assets dropped by almost $3 billion, to $20.5 billion in 2009.

It now is up to $22.3 billion.

"We feel like we've stabilized," said Scott Kelley, executive vice chancellor for business affairs.

Ripple effect

Donations dropped sharply in 2009, too, with UT schools reporting almost $200 million less in gifts than it received in 2008. Zimmerman said donations have begun to pick up again.

Even so, the losses will continue to ripple through university budgets for years to come.

"There has been an erosion of purchasing power," said Bruce Myers, an investment adviser with Cambridge Associates.

Universities use money from their endowments for scholarships, faculty salaries and other priorities. Because most base their withdrawals on a three-year average, the impact of a few bad years can linger.

Zimmerman said he will ask regents next month to approve new investment targets. Wednesday's meeting was a preview of what investment managers may try.

For example, he said, high levels of debt in U.S. real estate will give UTIMCO some investment opportunities to buy distressed securities, but he said it also will mean the national recovery will be "a longer, slower workout."

If all goes well, he said the UTIMCO diversified investment portfolio will have a 5.82 percent rate of return. With a growing economy and falling inflation, that could go up to 7.53 percent. Zimmerman said, however, there is a possibility that economic growth will fall while inflation rises and that would cause the portfolio to lose 1.2 percent of its value.

Investments in gold, natural resources and hedge funds are a means of countering that possible trend, he said. He said most of the gold purchases have been through futures trading, but he said UTIMCO may take physical possession of some gold.

Policy reversed

In other business, the UTIMCO board of directors voted to reverse a controversial policy that allowed them to co-invest with the state.

The University of Texas board of regents had adopted a ban on co-investment in 1999 after the Houston Chronicle reported on potential conflicts of interests with regents and the board of UTIMCO as they invested in the same private equity funds as the taxpayer-owned Permanent University Fund.

The UTIMCO board recommended dropping the policy in 2008. The argument was that the policy prevented board members from making investment recommendations on funds that they wanted to invest in themselves. Because of that, they argued, UTIMCO was missing investment opportunities.

The board heard Wednesday that no co-investment ever occurred and no meaningful investment tips had come in because of the policy.

The board voted to ask the UT board of regents at its August meeting to revert to the stricter ethics policy.






Let us now go to the bigger economic stories of the day.


First off, we got the Producer Price Index and it fell badly today:


US producers prices fall more than expected in June

WASHINGTON, July 15 (Reuters) - U.S. producer prices fell for a third straight month in June, pulled down by weak food and energy costs, according to a government report on Thursday that supported views the Federal Reserve would maintain its low interest rate policy well into 2011.

The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate dropped 0.5 percent after slipping 0.3 percent in May.

Analysts polled by Reuters had expected producer prices to dip 0.1 percent last month.



Today, the jobless numbers were still not indicative of a growth in the economy:


from Jim Sinclair:


Fears grow as millions lose jobless benefits 
By Nick Carey 
CINCINNATI | Wed Jul 14, 2010 5:38pm EDT

CINCINNATI (Reuters) – Deborah Coleman lost her unemployment benefits in April, and now fears for millions of others if the Senate does not extend aid for the jobless.

"It’s too late for me now," she said, fighting back tears at the Freestore Foodbank in the low-income Over-the-Rhine district near downtown Cincinnati. "But it will be terrible for the people who’ll lose their benefits if Congress does nothing."

For nearly two years, Coleman says she has filed an average of 30 job applications a day, but remains jobless.

"People keep telling me there are jobs out there, but I haven’t been able to find them."

Coleman, 58, a former manager at a telecommunications firm, said the only jobs she found were over the Ohio state line in Kentucky, but she cannot reach them because her car has been repossessed and there is no bus service to those areas.






The following was certainly not welcome news to the Obama camp:



8:32 Empire State Manufacturing 5.08 vs. consensus 18.46 
* * * * *

NY Fed manufacturing growth slows sharply in July







We also saw a contraction in the Philly Manufacturing area:


10:00 Jul Philadelphia Fed Index 5.1 vs. StreetAccount consensus 10.4
Jun reading was unrevised at 8.0.
* * * * *

Philly Fed factory activity index drops in July

Dollar Drops to Two-Month Low Versus Euro on Signs of Slower Manufacturing 
By Catarina Saraiva – Jul 15, 2010

The dollar dropped to a two-month low against the euro and fell versus the yen as reports showed manufacturing in the New York and Philadelphia regions expanded at the slowest pace this year and U.S. producer prices fell.

The euro advanced above $1.28 for the first time since May as demand at Spain’s government bond sale eased concern that nations in the currency region won’t be able to fund their deficits. Australia’s dollar slid against the yen as China reported slower economic growth.

“It’s not terribly surprising to see the U.S. dollar sold off,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “The economics have been softer. There’s some sovereign demand for the euro.”

The euro gained 1 percent to $1.2874 at 10:25 a.m. in New York, from $1.2743 yesterday, after touching $1.2893, the highest level since May 10. The euro dropped 0.2 percent to 112.45 yen, from 112.66. The dollar declined 1.2 percent to 87.35 yen, from 88.41.

The Federal Reserve Bank of New York’s general economic index and the Philadelphia Fed’s gauge fell in July to 5.1, reflecting the slowest pace of manufacturing expansion this year. Readings greater than zero signal growth.





The housing sector continues to disappoint.  Today record bank repossessions of usa homes are occuring at record pace:


Banks repossess US homes at record pace –RealtyTrac 
Thu Jul 15, 2010 12:01am EDT 
By Lynn Adler

July 15 (Reuters) – Banks repossessed a record number of U.S. homes in the second quarter, but slowed new foreclosure notices to manage distressed properties on the market, real estate data company RealtyTrac said on Thursday.

The root problems of job losses and wage cuts persist, making a sustained U.S. housing recovery elusive.

Banks took control of 269,962 properties in the second quarter, up 5 percent from the prior quarter and a 38 percent spike from the second quarter of last year, RealtyTrac said in its midyear 2010 foreclosure report.

Repossessions will likely top 1 million this year.

"The underlying conditions haven’t improved," RealtyTrac senior vice president Rick Sharga said in an interview.



This is a huge story:  the Pentagon is running dry on cash reserves:


Pentagon warns Congress: accounts running dry 
Wed Jul 14, 6:31 pm ET

WASHINGTON (Reuters) – The Pentagon said on Wednesday it may be forced to take extreme measures — like not paying salaries — if the Democratic-led Congress fails to pass a $37 billion defense spending bill before lawmakers begin an August recess.

A senior Democratic aide said lawmakers would find a way to get it done. "We will pass it this work period. We have to," the aide said.

Tensions are growing in the Pentagon about the fate of the bill, which has languished in Congress despite repeated pleas for action by Defense Secretary Robert Gates, who needs to fund a 30,000-troop surge for the Afghan war.

The White House has added to the drama, threatening to veto the bill over $800 million in education spending cuts that were added by the House of Representatives.

"While we hope and expect the Congress will get this done, we also are obligated now to begin seriously planning for the possibility that they don’t," Pentagon Press Secretary Geoff Morrell told reporters.


I guess I gave you a lot to read tonight. Gold will resume its upwards trajectory on Monday, once the options on the shares and GLD expire.
I will give a lengthy commentary on Saturday.

Posted By Harvey Organ to Harvey Organ's - The Daily Gold at 7/15/2010 04:31:00 PM

Posted By Harvey Organ to Harvey Organ's - The Daily Gold at 7/15/2010 06:01:00 PM

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