Good morning Ladies and Gentlemen:
Before beginning I would like to introduce you to the latest entrants to the banking morgue:
Bank Closing Information – November 12, 2010
These links contain useful information for the customers and vendors of these closed banks.
Gold fell yesterday to the tune of $37.70 to close out the week at $1364.40. Silver also fell by $1.46 to 25.94. In the access market, gold and silver rallied a bit
to close out the week at $1368.80 and $26.04 respectively.
The reasons cited for the raid were press releases showing the need for China to raise interest rates to slow down inflation. From the King report:
China’s Stocks Decline on Interest Rate Increase Speculation
China’s stocks fell, with the benchmark index dropping the most in three months, as investors speculated policy makers will raise interest rates to tame inflation.
The Shanghai Composite Index dropped 71.47, or 2.3 percent…the most since Aug. 10. The CSI 300Index fell 3.1 percent to 3,401.44. "There’s talk of an interest rate hike over the weekend,"…
To me this was just an excuse to bomb the silver and gold markets as JPMorgan`s short position in silver and HSBC`s short position in gold were getting a
little to steamy for them. When you see the volumes orchestrated by these two behemoths you will certainly understand what happened. I will discuss the numbers for you in my commentary below.
The total gold comex open interest fell slightly from Thursday`s reading: 644,738 from 642,951 for a fall of 1787 contracts. On Thursday we saw gold and silver being initially whacked and then they both strongly rebounded in price. Thus the numbers seem to suggest initial long liquidations at the beginning and this was complimented later in the session with new fresh shorting by the bankers.
The front December delivery month saw its OI fall from 334,299 contracts to rest at a very high 325,836. The Dec longs seem content so far to hold on their positions.
The front options delivery month of November saw its open interest fall slightly to 71 contracts. These guys have exercised options on gold and are waiting patiently for their physical gold.
Here is the scary stuff: the volume on the comex today estimated by the comex folk is 345,624 with an estimated 300,428 contracts traded in the front December month. For comparison on Thursday, the confirmed volume was also high at 207,199 with 178,483 in the front month. The estimated volume was 171,000 contracts so they revised it up by 21%
You can bet the farm that when the final numbers get published on Monday, the banking cartel threw in over 400,000 contracts. To give you an idea of how many gold ounces that represents you must multiply each contract by 100 oz. Thus the estimated volume of 345,624 represents 34,562,400 oz. If the real volume turns out to be 400,000 contracts that represents 40 million oz of gold. The world produces around 73 million oz so the estimated volume represents
47% of world annual production; If the real volume is 40 million then it represents 54% of world annual production. Our regulators seem content in letting these banks play (short) with unbacked gold and silver paper.
Now let us head over to the silver comex where we also had a wild day. The total comex silver OI fell marginally to 147,801 contracts from 149654 for a loss of 1853 contracts. As in gold it looks like we got some mild long liquidations early in the session followed by fresh shorting by our two friendly bankers. The front December month saw its OI drop marginally from 65,897 to 62,371. It looks like these guys are holding firm. We must wait until Monday to see how much damage occurred in the front months in both silver and gold. The November front month remains resolute with 15 open interest contracts still standing.( This is significant when you see that 21 deliveries were served upon).
And now for the important volume numbers. Yesterday, the estimated volume was a rather high 129,620. Not as high as the record 201,000 on Tuesday but high enough. For comparison purposes, the volume on Thursday was 104,367. The volume for the December contract was 110,244 contracts and thus it represented over 85% of the total trading volume. ON Thursday, the confirmed volume was 104,367 with the December volume at 84,597 or 81% of total volume.
Here is a chart on the 12th of November for gold and silver comex inventory changes and deliveries.
Withdrawals from Dealers Inventory
Withdrawals from customer Inventory
Deposits to the dealer Inventory
Deposits to the customer Inventory
No of oz served (contracts21
No of notices to be served..15
Withdrawals from Dealers Inventory
Withdrawals from customer Inventory
Deposits to the dealer Inventory
Deposits to the customer Inventory
No of oz served (contracts151
No of oz to be served 71
Let us start with silver:
When you look at silver you would think that it was no activity. Actually the activity was fierce. Let me explain:
There were two deposits of silver into the customer inventory:
1.customer no 1 deposited a huge 601,039 and
2.customer no 2 deposited 1,932 oz for a total of 602,971 oz
However two customers removed silver from its vaults:
1.customer no 1 removed 150,480
2.customer no 2 removed 455,672 for a total of 606,152.
by subtracting 606,152 from 606,152 one gets the net removal of silver of 3181 oz.
It is also interesting that almost exactly 450000 of those oz left the vaults of Scotia Mocatta and entered the vault of Brinks.
We are witnessing the continual withdrawal of customer inventory of silver from Mocatta`s vaults. They are now down to a record low of 5.4 million oz.
In the delivery notices department, the comex folk informed us that 21 notices were sent down for servicing for a total of 105,000 oz of silver.
The total number of notices sent down so far this month total 759 or 3,795,000 oz of silver. The total number of notices remaining to be served equates to
15 contracts or 75,000 oz.
Thus the total number of silver oz standing in this non delivery month is as follows:
3,795,000 oz + 75,000 = 3,870,000 (this number continues to climb)
And now let us explore the gold comex inventory changes and notices to deliver.
Again please note the tranquil nature of gold movement. We are coming to the biggest delivery month (December) for the whole year and yet we see
no gold enter the vaults. Again we see no transparency on this from the regulators.
The dealer received 2800 oz of gold. On dealer withdrew 1 brick of 100 0z and one customer withdrew a tiny brick of 96 oz. There was one adjustment, where
a dealer repaid a customer 965 oz in a probable lease repayment.
There was a massive 151 options exercised for gold on Friday for 15100 oz of gold. The total number of notices sent down so far total 1047 or 104700 oz of gold.
It looks like there are 71 notices that remain to be served. I am not sure what will happen once they remove the 151 contracts from the OI. However for simplicity sake I will still use 71 as the number that remains to be served. It may change:
Thus the total number of gold oz standing in this non delivery month of November is as follows;
104,700 oz (already served) + 7100 oz (to be served) = 111,800 oz of gold or 3.48 tonnes. (remarkable for a non delivery month)
Ladies and Gentlemen: if we are getting this kind of delivery notices, the month of December will be a doozy when you add regular deliveries on top of options exercised. I will be monitoring the December delivery months for both gold and silver very closely for you.
There is no COT report due to the Remembrance Day holiday.
In other physical news, our two ETF`s continue to shine with the central fund of Canada and Sprotts PHYS both registering gains to 6.4% premium to NAV. The GLD inventory over in England fell by .811 tonnes to 1290.8 tonnes.
From John Brimelow:
CEF and PHYS both increased their premiums to NAV to 6.4% and 6.4% from 6% and 3.94%. This may be the first time the two instruments have traded at parity. GLD shed 0.81129 tonnes to 1,290.85502 tonnes.
The SLV inventory as of Friday morning registered no gain or loss of its inventory at 344 million oz.
The gold premium in Viet Nam continues to rise above world spot gold price much to the chagrin of the Viet Nam rulers. They implemented plans to stop the importing of gold but it looks like the ordinary folk have found pathways for gold to enter this gold loving nation.
John Brimelow reports;
On early Friday morning local Vietnam gold stood at a $37.03 premium to world gold on $1,401.31 (Thursday $37.20/$1,402.78). The Vietnamese government’s attempt to jawbone gold is not working. The subject of Vietnamese gold has attracted the attention of the Wall Street Journal.
John Brimelow also reports that Turkey which is the gateway for purchases of gold from the Arab nations is also recording a premium to world gold:
According to the data from the Istanbul Gold Exchange, Turkey has turned a buyer. Local gold closed at a premium of $9.81 to world gold of $1,400 (Wednesday $5.52/$1, 3900).
I also want to bring to your attention the mammoth purchases of silver at the usa Mint.
U.S. Mint buyers ordered 3.15 million of the .999 fine silver coins in October, breaking a streak of four straight monthly declines. October sales combined with the already 255,000 sold in November (150,000 of those on Thursday) lifted 2010 Silver Eagle bullion coin sales to 28,885,500.
That was enough to topple the 28,766,500 tally which was the previous annual record set in 2009.
With nearly two months still left in the year, the annual record total will climb by several more million. Consider that five of the ten months gone by this year have had 3+ million sales, as the below table highlights. That bodes well when combined with the fact that November and December are traditionally among the strongest months of the year for gold and silver bullion coins.
There is yet another significant record that will likely be toppled before year’s end. Historically, the U.S. Mint begins selling newly dated or "next year" Silver Eagles in December so dealers can offer them immediately in January. For the first time, that did not happen for the 2010 Silver Eagles. They only launched on January 19. Bullion demand was so high that the Mint continued selling the 2009-dated Silver Eagles. As such, the 2009's not only enjoyed extra selling weeks in late 2008, but also in early 2010, making them the most sold year-dated Silver Eagle ever at 30,459,000.
While the Mint has sold 28,885,500 Silver Eagle bullion coins to date, 367,500 of them were 2009-dated eagles sold back in early January. For the 2010-dated Silver Eagles to become the most ever sold since the series was introduced in 1986, buyers will need to order just over 1.9 million more of them.
2010 American Silver Eagle Bullion Coin Sales
I would like to comment a bit on these numbers and its significance. It looks to me that the total number of silver eagle sales will probably
hit north of 36 million oz this year. The months of November and December are traditionally huge sales months for the mint as they also get a headstart with the 2011 year sales but record them in 2010. The usa must use all usa sources of silver first in their mintage of coins. If there is a shortage then they can import silver into the country to fabricate the coins.
The usa produces around 40 million oz of silver from all its mines such as Cour dÀlene, Hecla and Newmont. So the huge demand in silver will cause the comex bankers to have problems as the mint gets its silver first. Then you add in our two major silver ETF`s, the Central fund of Canada and Sprott`s new PHU.s silver fund,
one can imagine the migraine headaches that the comex bankers will endure trying to find available silver to satisfy the ever increasing demand for this very important metal. Silver is used in hydroelectric wires as a wonderful conductor of electricity. It is used in our pharmaceutical industry as an antibacterial and it is the recommended therapy for burns (silver sulfadiazine). It is finding new applications in washing machines and in clothing to prevent perspiration. Silver is still used in the photography business and in Xrays. It is falling in use in photography but scrap silver from the recovery of silver from photography is also falling.
I think I have exhausted the physical side of things so let us go to the big economic stories which will influence gold and silver on Monday and onward.
As I mentioned in the beginning of the commentary, the G20 meeting accomplished zero as there was many acrimonious moments between the usa and China, and emerging nations.
This was released by the Associated Press: (courtesy of Jim Sinclair)
Pessimism Pervades As G20 Leaders Show Sharp Split
Trade Gaps, Protectionism, State Manipulation Of Currencies Among Issues
JEAN H. LEE, Associated Press
Posted: 9:17 pm PST November 10, 2010Updated: 12:32 am PST November 12, 2010
SEOUL, South Korea — A strong sense of pessimism shrouded the start of an economic summit of rich and emerging economies Thursday, with President Barack Obama and fellow world leaders arriving in Seoul sharply divided over currency and trade policies.
The Group of 20 summit, held for the first time in Asia, has become the centerpiece of international efforts to revive the global economy and prevent future financial meltdowns.
Failure in Seoul could have severe consequences. The risk is that countries would try to keep their currencies artificially low to give their exporters a competitive edge in global markets. That could lead to a destructive trade war. Countries might throw up barriers to imports – a repeat of policies that worsened the Great Depression.
Hopes had been high that the Group of 20 – encompassing rich nations such as Germany and the U.S. as well as growing giants such as China and Brazil – could be the world forum for hashing out an economic way forward from financial crisis.
As I mentioned to you yesterday, the Fed already started on QEII. But look and see what the resultant action is.
Instead of rates going down they are rising with the 10 year rate at 2.76% up from 2.47% and the 30 yr bond prices falling from prices around 131 down to the 129 area.
The QEII is not behaving in the same manner of previous QE i as many holders are shunning the paper.
Here is this report out of Reuters:
First Fed QE-2 buying fails to lift Treasury prices
*Prices fall farther after Fed purchases
* Maturity range for Fed buying is between 4 and 6 years
* European debt crisis confounds U.S. bond market
* Trading desks understaffed after holiday
NEW YORK, Nov 12 (Reuters) - Prices of U.S. Treasuries fell on Friday as the first day of heavy purchasing by the Federal Reserve failed to jump-start wider demand for low-yielding government debt.
The Fed bought $7.23 billion in Treasury paper on Friday with maturities of between four and six years under its $600 billion bond-buying program announced last week to stimulate the economy. Prices hit session lows after the Fed completed its purchases, with both seven-year notes and 10-year notes trading a full point lower in price.
"Bears are still in charge," said Lou Brien, market strategist at DRW Trading in Chicago. "They were waiting for the purchase results and saw no surprises. Then they started selling again."
Suvrat Prakash, U.S. interest-rate strategist at BNP Paribas in New York, said traders had been waiting until the Fed buying details came out to execute trades they had already planned for the day.
"A couple of people were holding off on shorting the market until the Fed buyback data came out," he said. "It's just a bit of unwinding of long positions. Whenever there's a bit of bearish momentum and people get flushed out of their positions, you can see it go further when the technicals look weak and a lot of technical analysts are saying that now."
The 10-year note yield is poised for its biggest one-week jump this year, while the 30-year yield could see the largest increase over such a period since June 2009.
The Fed's purchasing plan was meant to push Treasury yields lower but after two months of frenzied speculation on the size and scope of the plan before it was announced the details left investors disappointed and yields began rising instead.
"Volatility is really keeping people to the sidelines," said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut.
"The price action has become so choppy, so erratic. You can't base it on anything you're seeing."
Volume was high, but some trading desks were understaffed following Thursday's Veterans Day holiday. Analysts also struggled to find a rhythm for the day after conflicting reports over whether the European Union would bail out Ireland as it struggles to control spiraling fiscal troubles.
"I'm actually kind of surprised the short to intermediate end (of the yield curve) is having the reaction that it is today," said Mary Ann Hurley, vice president of fixed income trading at D.A. Davidson & Co. in Seattle.
"We have the Treasury debt buyback and we still have the problems in Europe simmering," Hurley said. "With the holiday yesterday and supply out of the way, the economic data today really second tier, I think a lot of people made it a long weekend."
The latest set of European troubles did not provide the flight-to-quality bid that had often materialized during the flare-up of sovereign debt instability earlier this year.
Ader said many Treasury investors, whose bets that more Fed buying would push yields lower and prices higher had soured during an aggressive, week-long sell-off, weren't sure what to do ahead of the Fed's first round of purchases and so were waiting and watching…
This came last night where California surprisingly issued another state of Emergency in that its budget deficit is forecast to hit 19 billion dollars again.
This is just one month after their original budget was set. Please read this Bloomberg article carefully. The author is Michael Marois. (courtesy of James Sinclair)
Schwarzenegger Declares Emergency, Calls Special Budget Session
November 12, 2010, 12:22 AM EST
By Michael B. Marois
Nov. 12 (Bloomberg) — California Governor Arnold Schwarzenegger, citing a $25.4 billion budget gap over the next 19 months, declared a fiscal emergency and called lawmakers to a special session next month to begin dealing with the problem.
Schwarzenegger, a Republican whose term ends in January, late yesterday ordered the session to start Dec. 6, the day newly elected legislators are sworn in. He wants to take steps to erase an officially estimated $6.1 billion gap that has already emerged in the budget enacted last month.
In addition to the gap forecast for the fiscal year through June, the nonpartisan Legislative Analyst’s Office yesterday projected a $19 billion gap in the following 12 months. By Jan. 10, Governor-elect Jerry Brown, a Democrat who will be sworn in Jan. 3, must propose a plan to erase the next year’s deficit.
“The LAO’s estimate is a sobering reminder that California’s economy is still struggling,” Schwarzenegger, 63, said in a statement. “I have spoken to all four legislative leaders and they know what we are up against. They know it won’t be easy, but they also know they cannot wait to take action.”
The authority to declare a fiscal emergency comes from ballot measures Schwarzenegger championed in 2004, when he won approval to borrow $15 billion to fill that year’s budget gap.
Looks like we have more problems in the unemployment benefits area as more than 3 million Americans will start to lose benefits next month. The author of this story is Holly Gregory a reporter from the Tampa Newspaper. (courtesy of James Sinclair)
"Almost 3 million Americans, including 140,000 Floridians, are losing federal benefits."
140,000 Floridians losing federal unemployment benefits
By Holly Gregory, Reporter
Last Updated: Thursday, November 11, 2010
TAMPA – Three federally funded unemployment programs are ending soon.
The programs are the additional compensation pay program, the emergency pay, and extended benefits.
Unless lawmakers intervene with another emergency package, the federal benefits will begin to expire starting Nov. 30 through Dec. 11.
Almost 3 million Americans, including 140,000 Floridians, are losing federal benefits.
For some people searching for work, these benefits are their last safety net.
It’s a position Camisha Kemp never expected to be in.
Earlier this year, the mother of four re-married. Her husband, Antoine, was working for the state. She was running an at-home-daycare. Then the bottom fell out.
The situation is Ireland is getting dire by the minute. First it was commercial real estate crumbling causing problems for the banks. Now it is residential mortgages which are crumbling. Here are several articles on the plight of Ireland:
Irish contagion hits wider eurozone
Germany blamed for Irish debt soar
Brian Lenihan, Ireland's finance minister said the spike inborrowing costs was partly driven by "unintended" German comments proposing bondholders be forcedto take losses or "haircuts" if sovereign debt is restructured.
and this from Bloomberg business week:
G-20 Leaders Hold Crisis Talks on Ireland Debt Burden
Bailing out Ireland’s financial system could cost as much as 50 billion euros ($68 billion) under a "stress case" scenario compiled by the finance ministry and central bank…
"There may be a conflict here between the interests of the financial world and the interests of
politicians," Merkel said in Seoul yesterday. "We can’t constantly explain to our voters that taxpayers have to be on the hook for certain risks rather than those who make a lot of money taking those risks."
Jim Sinclair has a great cartoon explaining QEII and its consequences. You will enjoy it:
(go to the above site and find: from our 3 favourite brothers:
From our three favourite brothers.
Quantitative Easing Explained:
I would like to leave you today with this Greg Hunter article from USAWatchDog:
Courtesy of Greg Hunter’s USAWatchdog.com
The G-20 kicked off in Seoul South Korea this week. It seems to me everyone should be talking about the U.S. defaulting on its obligations by massive money printing. Instead, the group of twenty finance ministers and central bankers from the most important industrialized and developing economies of the world has been sidetracked. There is the threat of a North Korean attack on South Korea. The Guardian UK reports, “The British delegation is taking seriously the potential threat of an attack on the G20 summit by North Korea, whose border is just 50 miles away from the gathering in Seoul. A diplomat said: “There has been speculation that the North Koreans will attempt some kind of disruptive incursion into South Korea.” (Click here for the complete Guardian UK story.)
Then, there is the latest PIIGS (Portugal, Italy, Ireland, Greece and Spain) problem that has popped up. It seems Ireland has the Group preoccupied with another bailout in the EU. Reuters reports, “Ireland’s issues have moved to the forefront of currency concerns recently after taking a backseat to U.S. Federal Reserve policy for several weeks. Yields on 10-year Irish bonds rose well above 8 percent to a record high over comparable German debt, the euro zone’s standard. Investors are worried Ireland would not be able to cut spending as planned and may require a bailout, with bond holders forced to absorb losses.” (Click here for the complete Reuters story.)
There is also talk of a looming trade war among the G-20. The Associated Press reports, “A dispute over whether China and the United States are manipulating their currencies is threatening to resurrect destructive protectionist policies like those that worsened the Great Depression. The biggest fear is that trade barriers will send the global economy back into recession. Hopes had been high that the Group of 20, which includes wealthy nations like Germany and the U.S. and rising giants like China, could be a forum to forge a lasting global economic recovery. Yet so far, G-20 countries haven’t agreed on an agenda, let alone solutions to the problems that divide them.” (Click here to read the complete AP story.)
Yes, a trade war could do great damage but, to me, that should take a back seat to what the Federal Reserve is doing by starting another round of quantitative easing (QE2). The Fed is printing up a fresh $600 billion (for starters) and is on its way to turning the dollar into candy wrappers and toilet paper. This is the currency that most of the world uses for international trade. I cannot believe this is not the first item on the agenda of the top financial officials in the world!
I would you all have a grand weekend and I will see you Monday night.
all the best