Saturday, December 4, 2010

Silver and Gold shorts in trouble/paper money no where to go!/poor jobs report

Good morning Ladies and Gentlemen:

 

Before commencing, for the second straight week, Sheila Bair of the FDIC has given her troops time off giving some bankers a week's supply of breathing air left.  Thus there are no new entrants into the banking morgue. With housing prices continuing to falter, many banks should have entered the morgue.  Sheila is probably conserving were dwindling supply of FDIC cash.

 

We had quite a day yesterday.  Gold closed at $1405.40 at 1:30 pm, the close of comex trading.  Gold had a stellar day rising by $15.90 for the day. In the access market, the shorts threw in the towel and gold rose to $1414.50.  Silver on a percentage basis did better than its more famous cousin gold, rising by 70 cents crossing the 29 dollar barrier to close at a 30 yr high at $29.24. The banking cartel used the 1400 dollar mark as the line in the sand and defended that level with massive paper.  The silver line in the sand was 29.00 and that was pierced as well.  The street were very disappointed in the jobs report expecting a huge gain of 150,000 workers only to find out that 50,000 were created.  I will go over the numbers with you when we discuss the big economic news of the day.

Let us first check on the comex numbers and where we stand. 
First gold:

The total gold comex open interest (OI) fell by 4526 contracts on yesterday's reading to 590,118 from 594,644. This reading of course is basis Thursday night.  With gold rising during the day only to be hit with massive bank selling in the paper time zone  (12 pm-1:30 pm) the net result was some bank short- covering. The front December delivery month saw its open interest fall from 5416 to 4362.  The estimated volume on Friday was a very healthy 158,675 contracts with no switches.  The bankers were certainly frightened with news that the USA was in same boat as Europe with respect to their economies.

And now for silver:

The total silver comex OI refused to fall as it rose by a small 476 contracts to 133,476. The front delivery month saw its open interest fall from 1809 to 1152 basically reflecting the huge 600 notices sent down for servicing on Thursday. The estimated volume on Friday was also a very healthy 56,973 contracts with no switches.  The confirmed volume for Thursday was a very high 70,801.

And now for the all important inventory changes and delivery notices:

Here is a chart on the third of December for gold and silver comex inventory changes and deliveries.

 

 

Silver

Withdrawals from Dealers Inventory 

5,171 oz

Withdrawals from customer Inventory 

319,865 oz

Deposits to the dealer Inventory

 Zero

Deposits to the customer Inventory

48,876  oz

No of oz served  (contracts313

 1,565,000 oz

No of notices to be served..839

4,195,000oz

Gold

Withdrawals from Dealers Inventory 

100 oz

Withdrawals from customer Inventory 

  2122 oz

Deposits to the dealer Inventory

 zero oz

Deposits to the customer Inventory

Zero oz

No of oz served (contracts  520

 52000oz

No of oz to be served3842

  384200oz

 

Let us start with silver. As you can see we had a very small withdrawal from the dealer of 5171 oz and that no doubt entered the customer to help in the settling of contracts. There was a huge withdrawal of silver from the customer of 319,865 contracts and that silver left all registered vaults.  There was also a huge 48,876 oz enter the customer vaults for storage.  The comex folk sent down 313 delivery notices to our patient longs.  The total number of notices sent down so far total 1003 or 5,015,000 oz. To get at the number of notices to be served, I will take the 1152 open interest which is basis Thursday and subtract the 313 notices for Friday which should give us a minimum number that will be called upon this month.  Thus 839 new notices will be sent down during the month for a total of 4,195,000 oz of silver.
The total number of silver oz standing for physical metal (the rest settled for paper dollars ) is as follows:

5,015,000 oz already served+  4,195,000 oz (to be served)  =  9,210,000 oz. ( we have lost approximately 18 million oz of silver having settled for cash during this delivery month).  We actually picked up approximately 200,000 oz from Thursday's reading.

And now for gold:

I sense some trouble here. December is the biggest delivery month of the year and we saw no activity in the comex warehouses.  There was a huge fat zero oz enter the dealer and the customer. Very strange indeed. We witnessed a tiny withdrawal from the dealer of 1 brick of 100 0z. A customer withdrew 2122 oz from all registered vaults. We did see another of those adjustments which we are seeing on a daily basis.  This time a dealer leased 868 oz from the dealer and paid  a handsome premium to the customer. Looks to me like the gold comex vaults is bare like silver.  The comex notified us that 520 notices were sent down for servicing (52000 oz of gold).  The total number of notices sent down so far this month total 7558 or 755,800 oz of gold.  In order to get what is left, I will take the open interest in the Dec gold of 4362 which was basis Thursday and subtract the 520 notices sent down on Friday which will give us 3842 contract left to be serviced or 384200 oz of gold.
Therefore the total number of gold oz standing in this delivery month of December is as follows:
755,800 oz (already served)  +  384,200 oz (to be served)  =  1,140,000 oz.  ( we have lost a tiny 13,000 oz due to cash settlements from Thursday).

It looks like the remaining gold and silver that are standing are resolute and only want physical. We will see how this plays out.

Before proceeding, many have asked me how many oz of gold and silver are really short.  That is the 64 million dollar question but I will try and give you an approximate answer.  In silver, Ted Butler believes that the total short position by the bankers is 3 billion oz.  The comex for sure is 500 million oz short, but we must also include the silver deposits written by the bankers for many unsuspecting investors.  This must be about 1 billion oz and then we have the OTC market between the bankers and this is estimated to be around  1.5 billion oz.
Butler estimates that we have no more than 300 million oz of silver left on the planet.  With the price of 29.00 dollars the total market price of this silver is 8.7 billion dollars.  With a shortfall of 3 billion oz, and a cost base of say 7.00 dollars to the bankers, we multiply 22.00 dollars  (the loss) which will give us 66 billion usa dollars lost.  The leverage in the marketplace is 66 divided by 8.7 billion or 7.5 to one.  However much of the silver is in private hands and not in the dealers hands.  Jeff Christian of CPM metals estimates that the leverage that the bankers use with silver in their possession is 100: 1. Now you can see the danger the bankers are in as each silver oz is withdrawn by customers.  The bubble of shorts is so big that it cannot be covered.

In gold, we have a better picture because gold is never consumed like silver, and central banks do have gold as reserves.  The short position by the banks of gold is around 7,000 tonnes, sold as forwards, but the bankers also short calls. The BIS data seems to suggest that the banks are short in the aggregate around 18000 tonnes or 576 million oz.
Let us say that the bankers cost is around 500.00 dollars (remember they sell massive calls against their inventory as well) then in dollars, the short is 518 billion dollars which must be covered  (1400 dollars - 500 dollars cost=  900 dollars x  576 million oz =   518 billion dollars.  No wonder the central bankers are printing massive amounts of paper money.

The demand for gold per year has been around 4400 tonnes per year with mining production at around 2500 tonnes on average.  The 1900 tonnes of gold has been made up through the leasing of gold by the bankers.

These numbers are at best a guess but  it should be pretty close to this. We believe that the leasing of gold has decimated all of central bank gold.  They started in 1988 with 30,000 tonnes (excluding the 3000 tonnes of IMF gold).  At best 12,000 tonnes remain.  At worst, only 5-6000 remain and this is with China and Russia.

In silver, the demand for silver has been 800-900 million oz per year with a supply from the mines at 500-600 million oz.  Scrap silver has been around 170 million oz and thus the remaining silver had to be made up with supplies from above ground.  The usa had 2 billion oz in 1990 and today it has zero.  It is believed that China is the supplier of that silver to the tune of 600 million ozs or so.

I hope that this gives you a better understanding of the total short positions and what it means.  I tried to simplify things without going into the derivative calculations.

end

The premiums on our pure physical etfs we follow continue to shine yesterday:

The P.SLV of Eric Sprott registered a premium to NAV of 6.82%.  This silver is real and one can retrieve silver by handing in shares.  The SLV on the NYSE has no physical silver behind it.

The PHYS gold ETF of Sprott registered a premium to NAV of 3.76%.
The central fund of canada continues to shine with a premium to NAV of 9.7%. The central fund of canada CEF.a has equal amounts of silver and gold and it is real physical.
The SLV fund which has as custodians JPMorgan on Friday night filed this "inventory"  ie. no change from Thursday.

Ounces of Silver in Trust

346,542,618.000

Tonnes of Silver in Trust Tonnes of Silver in Trust

10,778.68

The GLD which has as custodians HSBC filed this on Friday night:

Total Gold in Trust

Tonnes: 1,298.03

Ounces:41,732,948.79

Value US$:
58,570,015,312.92

we lost a tiny tonnage from 1298.45 to 1298.03.

end.

Let us now go to the COT report and see if we can glean any new information to help us next week.  Here is the gold COT report:

COT Gold, Silver and US Dollar Index Report - December 3, 2010

 


-- Posted Friday, 3 December 2010 | Digg This ArticleDigg It! | Share this article | Source: GoldSeek.com 

Gold COT Report - Futures

Large Speculators

Commercial

Total

Long

Short

Spreading

Long

Short

Long

Short

265,824

38,217

80,653

183,793

454,262

530,270

573,132

Change from Prior Reporting Period

3,855

-2,423

-10,427

-7,526

-950

-14,098

-13,800

Traders

202

50

57

43

47

266

137

 

 

Small Speculators

 

 

 

Long

Short

Open Interest

 

 

69,888

27,026

600,158

 

 

 

-8,456

-8,754

-22,554

 

 

 

non reportable positions

Change from the previous reporting period

 

COT Gold Report - Positions as of

Tuesday, November 30, 2010

 

Those large speculators that were long  continued to add positions sensing European problems in Ireland, Portugal and Spain and a QEII addition.
Those large speculators that were short sensed economic danger and covered 2423 contracts.
And now for our famous bankers:
Those commercials that were long gold removed a massive 7526 contracts from those positions. Those commercials that have been perennially short only added 950 positions to their shorts.
Now look at the small speculators:  they entered the scene in full gusto..and got it wrong.  The small speculators that have been long removed 8456 contracts from their longs.  However those small speculators that were short removed a healthy 8754 contracts probably due to margin calls.

And now for silver:

COT Gold Report - Positions as of

Tuesday, November 30, 2010

 

 

Silver COT Report - Futures

Large Speculators

Commercial

Total

Long

Short

Spreading

Long

Short

Long

Short

40,818

6,784

33,232

29,791

79,561

103,841

119,577

511

-3,097

-3,151

-7,629

-4,712

-10,269

-10,960

Traders

85

33

36

35

38

142

89

 

Small Speculators

 

 

 

Long

Short

Open Interest

 

 

29,298

13,562

133,139

 

 

 

-4,277

-3,586

-14,546

 

 

 

non reportable positions

Change from the previous reporting period

 

COT Silver Report - Positions as of

Tuesday, November 30, 2010

 

Here we see that those large speculators that have been long continued on by adding another 511 contracts to their long positions.
Those large speculators that have been short saw the light and covered a massive 3097 contracts.
The commercials:  those large commercials that have been long covered a huge 7629 contracts.  Those commercials that have been short lessened their shorts to the tune of an addition of 4712 contracts.  This latter group is JPMorgan and HSBC.  They are feeling the pain this weekend.
Our small speculators:  they are also entering the arena.  Those that were long took profits and lessened their longs by 4277 contracts. Those small speculators that have been short removed a healthy 3586 contracts as they got it wrong and lost big amounts of money on their initial shorting.

end.

We saw on Thursday robust import numbers from China.  Now we see that India is not to be undone as they are importing massive quantities:

http://online.wsj.com/article/SB1000142405274870398
9004575652373890307644.html?mod=googlenews_wsj

 

India 2010 Gold Imports Likely Up 46% on Rural Demand

·         Article

·         Comments (1)

MORE IN INDIA SUBSECTION »

BY SWANSY AFONSO

MUMBA—India's gold imports this year are likely to reach 700 metric tons, about 46% more than in 2009, as higher farm output and prices encouraged farmers to invest in the yellow metal and boosted local consumption, the president of the Bombay Bullion Association said Friday.

India, the world's largest gold consumer, imported 480 tons in 2009, compared with the usual 700 to 800 tons, as a drought hurt farm production and the purchasing power of farmers, who account for 60% of gold jewelry sales. Rains this year were normal in most parts of the country, boosting agriculture production.

end.

I will leave the physical part of my commentary with this story from China.  The story is from Bloomberg:

China Should Consider Adding to Gold Reserves, PBOC Adviser Says

December 03, 2010, 12:09 AM EST

 

By Bloomberg News

Dec. 3 (Bloomberg) -- China should consider adding to its gold reserves as a long-term strategy to pave the way for the yuan’s internationalization, central bank adviser Xia Bin wrote in the China Business News today.

The country must revise its foreign-reserves management principle, Xia wrote. China is the world’s largest producer and second-biggest user of gold and has a world-record $2.65 trillion in foreign-exchange reserves.

Gold is set for a 10th annual increase, the longest winning streak since at least 1920, spurring central banks globally to add the metal to reserves. China is allowing greater use of its currency for cross-border transactions to reduce reliance on the dollar, after Premier Wen Jiabao said in March he is “worried” about holdings of assets denominated in the greenback.

“If China increases gold buying significantly to diversify their foreign exchange reserves, that could affect the market,” said Park Jong Beom, a trader at Tong Yang Futures Trading Co. in Seoul.

Gold for immediate delivery increased 0.4 percent to $1,390.32 an ounce at 12:49 p.m. in Shanghai, boosting this week’s gain to 2 percent, as China’s imports increased and a fall in the dollar boosted the appeal of the precious metal as an alternative asset.

Imports of gold by China jumped almost fivefold in the first 10 months from the entire amount shipped in last year, the Shanghai Gold Exchange said yesterday. Shipments were 209 metric tons compared with 45 tons for all of 2009, said exchange Chairman Shen Xiangrong.

State Buying

“In the mid and longer term, of course, I think China is the biggest bullish factor for gold prices,” Yuichi Ikemizu, head of commodity trading at Standard Bank Plc in Tokyo, said, referring to the gold imports by China. Still, “the advisors are not the guys to decide policies of the central bank. They can advise whatever they want and the percentage of gold in foreign reserves is really small.”

The country increased gold reserves by 454 tons to 1,054 tons since 2003, the State Administration of Foreign Exchange said last April. The metal only accounts for 1.6 percent of the nation’s reserves held by the People’s Bank of China, according to the World Gold Council. China doesn’t regularly publish gold- trade figures and rarely comments on its reserves.

Bangladesh bought 10 metric tons of bullion from the International Monetary Fund for about $403 million in September. That followed a 200-ton purchase by India last year, as well as reserve increases by other Asian nations including Sri Lanka.

Solvency

Building gold as the basis of solvency has been used through history, PBOC adviser Xia wrote. Having a corresponding amount of solvency is a necessary precondition and indispensible safeguard in the long-term strategy for the internationalization of the yuan, Xia wrote.

China also needs to set up a commission soon under the State Council to make plans for investing its foreign reserves overseas, Xia wrote. The investments should include oil, resources, equipment and technology, Xia said.

The non-convertibility of the yuan is a major hurdle in China’s efforts to become a “real financial power,” Bank of China Ltd. Chairman Xiao Gang wrote in a commentary published in today’s China Daily.

The Chinese currency will only become an international monetary unit like the Euro or the dollar once it can be freely converted into foreign currencies, Xiao wrote.

Yuan Transactions

Trade transactions settled in the yuan may rise to $3 trillion a year by 2015 as China pushes for the wider use of its currency as an alternative to the dollar in business and finance, China Construction Bank Corp. said Nov. 23.

China Construction Bank, which helped organize the biggest number of bond sales in China this year, forecasts an increase from the current $19 billion a year of yuan-denominated trade transactions, or commercial deals primarily paid for and financed using the yuan that don’t involve the dollar.

China should raise its gold holdings and the 1,054 tons of reserves are inadequate compared with the 8,133 tons held by the U.S. and 3,408 tons by Germany, Meng Qingfa, a researcher at the China Chamber of International Commerce said on Oct. 27.

“China does not hold much gold in its reserves for now so I cannot immediately see what impact it will have on gold prices,” Tong Yang Futures’ Park said.

--Zhe Huang. With assistance from Sungwoo Park in Seoul and Helen Sun in Shanghai. Editors: Richard Dobson, Jarrett Banks.

To contact the editor responsible for this story: Bloomberg News at jliu42@bloomberg.net

end.

 

 

end

Now we shall head over to the big economic stories of the day.  As I pointed out to you Friday was the release of the big jobs picture and it was horrific.

This is an excellent presentation of the employment report from Eric DeGroot from Jim Sinclair commentary at www.jsmineset.com

 

Employment Report – Disinformation at its Finest

Posted: Dec 03 2010     By: Eric De Groot      Post Edited: December 3, 2010 at 3:57 pm

Filed under: General Editorial

I found myself characterizing the employment report as disinformation at its finest. It’s not so much that spinsters were pressing hard to massage today’s headline number into something it’s not but rather how data has been progressively “managed” to convey the right message. Anyone that crunches government data knows what I mean.

John Williams, the man behind shadowstats.com – and what Jim calls a must have service – reveals the wise use of techniques such as ignoring discouraged workers and the use of the birth/death model to selectively ‘nudge’ the employment series over time. Part two of a five part commentary series discusses the implication of some of these techniques.

Today’s employment data boils down into two important observations.
First, the job creation during the economic expansion has been unable to match the labor force demand on an annual basis. That is, the jobs creation has lagged the labor force expansion. This in part explains why the unemployment rate, significantly understated due statistical techniques, continues to rise despite the positive headline number. The under performance of job creation relative to labor is revealed by the subzero reading in the job creation histogram below.

Job Creation Histogram (JCH): Net Nonfarm Payrolls Added/(Lost) less Civilian Labor Force Added/(Lost), 12 Month Average:
clip_image001

Second, the birth/model, which calculation frequency will be modified starting January 2011*, continues to dominate job creation in 2010. Like 2004, 2010 represents another liquidity injection phase – quantitative easing part 2. Over 1.9 million jobs were created from January to November 2004. The birth/death model (estimating algorithm) accounted for nearly 40% of these jobs. By comparison only 950,000 jobs have been created over the same period in 2010. Here’s the disturbing part: over 50% of those jobs were estimated by the birth/death model. Not only is job creation weaker but also more heavily dependent on statistical techniques to create them. This is not a good sign.

Birth/Death Model (BDM) Contribution to Nonfarm Net Payrolls (NFP) Added/(Lost):

clip_image002

* Upcoming Changes to Establishment Survey Data

Effective with the release of January 2011 data on February 4, 2011, the
establishment survey will begin estimating net business birth/death ad-
justment factors on a quarterly basis, replacing the current practice of
estimating the factors annually. This will allow the establishment survey
to incorporate information from the Quarterly Census of Employment
and Wages into the birth/death adjustment factors as soon as it becomes

U.S. Payroll Gains Trail Forecasts; Unemployment Rises

By Timothy R. Homan – Dec 3, 2010 9:15 AM PT

Employers added fewer jobs than forecast in November and the unemployment rate rose to 9.8 percent, pointing to economic weakness that’s likely to keep the Federal Reserve pumping money into the financial system.

Payrolls increased 39,000, less than the most pessimistic projection of economists surveyed by Bloomberg News, after a revised 172,000 increase the prior month, Labor Department figures showed today in Washington. The jobless rate rose to a seven-month high, while hours worked and earnings stagnated.

Treasury securities jumped and the dollar weakened as the data contradicted recent reports showing manufacturing growth and stronger holiday sales. The unexpected gain in unemployment is likely to intensify political debate over extending Bush-era tax cuts, as well as the Fed’s $600 billion program of asset purchases intended to spur growth.

More…

end.

The jobs report was so scary it caused the usa dollar index to fall almost 100 points.  It seems that investors do not know where to park their money.  They fear the Euro zone with Greece, Ireland, Spain, Portugal and Italy in big trouble so they send money over to this side of the pond only to see the same troubles. It looks to me like the world is beginning to look at gold and silver for once.  Boy, it took them a long time.!!

This next story should send shivers down the backs of Obama, Summers, and Geithner: (from China Business News)

China Is `Scared' of U.S. Monetary Policy, Rogoff, Rickards Say

By Catarina Saraiva and Kathleen Hays - Dec 2, 2010 5:27 PM ET

China Is 'Scared' of U.S. Monetary Policy

Kenneth S. Rogoff, Harvard University professor of Economics, speaking in Singapore. Photographer: Munshi Ahmed/Bloomberg

Policy makers in China, which holds $883.5 billion in U.S. Treasuries, are concerned the nation with the world’s biggest economy is debasing its currency, according to Kenneth S. Rogoff and James Rickards.

The world is in the early stages of a currency war, said Rickards, chief financial and administrative officer of Oro Capital Advisors LLC. Rickards, Rogoff, a professor of economics and public policy at Harvard University, and Laurence H. Meyer, co-founder of Macroeconomic Advisers LLC, spoke today at the Bloomberg Hedge Funds 2010 conference in New York.

The Federal Reserve’s "good old-fashioned monetary policy" does not intend to devalue the dollar, said Meyer, a former member of the Fed’s Board of Governors.

"The U.S. is not competitively devaluing its currency, that is total garbage," Meyer said.

Meyer also said Fed Bank of St. Louis President James Bullard isn’t a proponent of raising interest rates to keep inflation from accelerating. Investors who have that perception have misread his comments, he said.

The Fed last month expanded its asset purchase program to buy $600 billion of Treasuries in six months in an effort to bolster the economy. The measure may prompt U.S. legislators to draft trade legislation with countries such as China, which limits movement in its currency, Rogoff said.

"The idea that China is this monster, gorilla in the world economy, is not true -- they are very scared," Rickards said. "They made one very large mistake, that they trusted the U.S."

International leaders including Chinese Premier Wen Jiabao have criticized the Fed, saying its policy will cause instability and faster inflation. U.S. Treasury Secretary Timothy F. Geithner has called on China to end its limits on the yuan and let the currency rise against the dollar over time.

-END-

It seems that Bart Chilton is having his war of words with his fellow commissioners..courtesy of Zero Hedge:

)

Bart Chilton Urges Corrupt CFTC Colleagues To Actually Act On Behalf Of Investor Protection For Once, Move On Position Limits

Submitted by Tyler Durden on 12/03/2010 10:38 -0500

Even as the CFTC is doing its best to postpone indefinitely (and hopefully infinitely) a review of limit speculative positions held by commodity traders (read JPM), commissioner Bart Chilton, who really should shut up if he knows what is good for him, told the CFTC to instead act quickly and actually do something right for investor protection for once (not necessarily in those words). From Reuters: "The regulator, which has a mid-January deadline, has been pushing back the date to propose new speculative limits in energy and metals markets, and so far has not given a time for when it will be introduced. This proposal should be discussed on December 9th at the commission's next meeting; a proposal should be put out for public comment as soon as possible; and we should commit to meeting the statutory deadline," said Bart Chilton, a CFTC commissioner. "We can always find excuses, justifications, or pretexts for inaction -- this rule is too important to let any of those get in the way of fulfilling our statutory responsibilities, and keeping our promise." The problem is that none of "those" are standing in the way of fulfilling statutory responsibilities: there are only two things that are standing in the way, and they are called Jamie Dimon and Blythe Masters.

-END-

Looks like Camden New Jersey is going to have to do without a police force and a fire fighting team: (from Jim Sinclair commentary)

Camden City Council Approves Massive Police And Fire Layoffs

December 2, 2010 11:05 PM

CAMDEN, NJ (CBS) – Camden City Council, as expected, voted Thursday to lay
off almost 400 workers, half of them police officers and firefighters, to
bridge a $26.5 million deficit.

That’s about a quarter of the city’s entire work force.

Five members of City Council voted unanimously to approve the layoff plan -
two other members were absent. The cuts take effect in mid-January.

Exactly how many city workers will be affected is still an open question,
although nearly half the city’s police and a third of the firefighters are
slated to go.

More…

end.

I would like to leave you with this wonderful depiction of the silver manipulation of JPMorgan in cartoon form.  It is accurate and needless to say, why we are in such a mess in the silver market.  The video is courtesy of www.silvergoldsilver.com

watch the video:

 

December 3, 2010 10:57 AM

http://3.bp.blogspot.com/_ZjVVq4XTosA/TKD4FHPQavI/AAAAAAAAAAo/p5xM_R8MdQo/S220/goldsilverpaint.jpg

Blogger www.silvergoldsilver.com said...

Harvey,

I made this especially for you! Enjoy, you are truly an inspiration.

http://www.youtube.com/watch?v=Gl47z2g2EvI

December 3, 2010 12:36 PM

 

I wish that all of you have a wonderful weekend and I will see you on Monday.

Harvey

 

 

 

 

 

 

Search This Blog

Loading...