Good morning to you all and a Happy New Year. May this year be a healthy and prosperous one for you.
Silver finished the regular comex session at $30.91. It also finished the access market price at the same level reaching its pinnacle for the year at closing time. The highest ever close on silver is $50.00 which occurred during the Hunt brothers attempt at cornering the silver metal (January 1980). Most of the gains in that year occurred during December 1979 and January 1980. Silver has now spent more time over 20.00 dollars this past year than it did in 1979-1980.
Gold finished at regular comex session at $1421.00 and it too finished the access market at the same level. Gold reached its pinnacle price for this year and all time at closing.
I would like to point out that gold has now risen consecutively for the past 11 years:
From Richard Russell: ( have inserted the 2010 closing price of gold)
The venerable Richard Russell…
December 27, 2010 -- I have posted below the year-end price of gold starting with the year 2000, the first up-year of one of the greatest and least appreciated bull markets in history. Take in this series, you may never see its like again.
2000 -- $273.60
2001 -- $279.00
2002 -- $348.20
2003 -- $416.10
2004 -- $438.40
2005 -- $518.90
2006 -- $638.00
2007 -- $838.00
2008 -- $889.00
2009 -- $1118.40
2010 -- $1421.00.
As Sheila Bair gave her troops off for New Year's eve, there are no banks that entered the banking morgue. Expect around 800 banks to fail during the next year or so as the housing market is taking its toll on the banks.
Let us now proceed to the final day of trading at the comex.
The total gold comex open interest fell by 7413 contracts as the banks saw the light and covered some of their shorts. The final resting open interest for the year is 583,445. Please remember that this is basis Dec 30.2010. I will get Dec 31.2010 open interest on Tuesday. The front December month is now off the board completely as I will report on the front options delivery month of January. Please note that January is a non delivery month for both gold and silver as only options exercised will be shown.
I will include for you the front delivery month of February for gold and March for silver. The January options open interest recorded yesterday by the CME shows 239 open interest contracts to be served upon with the reading of 330 at the first day notice, the prior day.
We were notified that 206 contracts had the intention of being served on Dec 31.2010 and I reported this development to you on Thursday. The front delivery month of February has a rather large 346,964 open interest. This number will start its descent in January. The estimated volume at the gold comex yesterday was a rather low 51,263. The confirmed volume for Thursday was 77,614. It seems that the bankers took off early and that left silver and gold to rise unimpeded.
Now for silver;
The total silver comex open interest fell by 1511 contracts with the fast advancing death price march by the silver longs. Our bankers, having reviewed that silver's open interest did not contract at all, decided to lighten up on their shorts as the damage in collateral payments is getting to them. Remember that all the banks have collectively a short position of:
a) forwards of around 4 billion oz.
b) options or calls against silver at 3 billion oz.
total: 7 billion oz or10 years worth of production.
These banks must put up collateral for their short positions and thus additional billions must be placed for these guys to continue their criminal ways. (For those newcomers we get the data at the banking participation report in December 2010 and the BIS derivative positions of the banks Nov 2010)
The final resting open interest for silver for Dec 31.2010 stood at an extremely high 136,275. The front options delivery month of January saw its open interest at 271. The Thursday level was recorded at 464. We also got 219 deliveries notices that I informed you on Thursday. I am confident that the 219 deliveries was subtracted from the 464. The front delivery month of March has its open interest at a very high position of 78811. This level will rise and then start its descent in February as March approaches. The estimated volume for yesterday was 17,864. The confirmed volume for Thursday was 31,327.
Here is the final chart for Dec 31.2010 on deliveries and inventory changes at the comex:
Withdrawals from Dealers Inventory
Withdrawals from customer Inventory
Deposits to the dealer Inventory
Deposits to the customer Inventory
No of oz served (contracts219
No of notices to be served.245
Withdrawals from Dealers Inventory
Withdrawals from customer Inventory
Deposits to the dealer Inventory
Deposits to the customer Inventory
No of oz served (contracts 206
No of oz to be served 239
Let us start with silver. First the easy stuff. Surprisingly no silver entered the dealer yesterday which was first day notice. The boys are having trouble finding available silver to settle. We did witness two big deposits by the customer totalling 304,592 oz and another big withdrawal of 162,513 oz. The big movements by the customer did not stop throughout the entire month of December. There were no adjustments.
And now the tricky stuff on the deliveries so follow me. The comex notified us of their intention to serve upon 219 options of contracts who were rewarded with a future contract and these boys are standing for metal. On the 30th of December the open interest stood at 464 and with yesterdays level of 271, I think we are safe to say that the 219 delivery notices were subtracted from the 464 OI recorded on December 30. The smoke will clear by January 4th but I believe I am correct on this.
Thus we have total notices served at 219 contracts or 1,095,000 oz of silver. To obtain what is left, I subtract 464 (open interest Thursday)- deliveries (219) to give 245 left to be served upon or 1,225,000 0z.
Thus, it looks like so far, the total number of silver oz standing from options exercised is: 1,095,000 plus 1,225,000 (to be served) 0r 2,320,000. This is extremely high for the first two days. Also remember that the comex folk hide options exercised in the back pocket.
by the end of the month we may get another 4 million delivery of silver in an off-month.
And now for gold:
Again we note that no gold enter the dealer which usually occurs at first day notice. We did see a massive 50,997 oz leave a customer. Strange to see this on the last day of the year. There were no adjustments.
As for the delivery notices on options exercised, I feel we must do the same type of calculation we did for silver. There were 206 notices of intent sent down on December 30.2010. There were 330 open interest recorded on that day so I feel I must subtract the deliveries of 206 from the 330 which would give us 124 notices left to be served. However look and see that the open interest then rose again to 239 (in real time) from the 124. The fact that the comex never gives us the real open interest until the next trading day always plays havoc to us as we must guess their findings. Because there was no new delivery intentions, I will say that all notices sent down were subtracted from the original open interest of 330 which will leave us with 239 options notices left to be served upon:
The total number of notices sent down so far in this non delivery month of January is 206 for a total of 20600 oz of gold. The number left to be served is 239 or 23,900 oz.
Thus the total number of gold oz standing from options exercised is 20600 oz + 23,900 (to be served) = 44,500 oz. This is very high for the first two days and portends trouble for our bankers as more and more seek metal from comex.; The comex is generally not a delivery port like the LBMA. It seems that the LBMA is out of metal and investors seek all available physical metal wherever they can.
Herein is the ETF story for today:
Total Gold in Trust
The GLD registered neither a gain or a loss of inventory. Thus the GLD in tonnage has its inventory at 1280.72 tonnes of gold.
Surprisingly, the folk at the SLV on the last day were busy as they increased their inventory of silver for the first time in quite a while to 351,136,751 oz:
Ounces of Silver in Trust
Tonnes of Silver in Trust
for comparison here is the reading for Dec 30.2010:
Ounces of Silver in Trust 350,550.455
Tonnes of Silver in Trust 10,903.34
the gain in oz is 586,000 oz or in tonnes a gain of 18 tonnes.
That is a lot of silver to get in one day. Where on earth did they get?
Our ETF's that we follow still command a decent positive to NAV.
The Sprott silver fund PSLV registered a huge positive to NAV of 16.38% reflecting silver's huge strength. (Tonight's reading)
The Sprott gold fund PHYS registered a positive to NAV of :2..55%
The central fund of Canada which represents equal parts of physical silver and gold reported a 10.1 % premium to NAV
Please note that huge premium on the sprott silver fund at 16.38%. This is probably proof of silver shortage as premiums are rising in this vehicle and the central fund of Canada due to shortage of metal.
The COT report will will released on Tuesday.
I would also like to thank everyone who highlighted to me on the story of the mint discontinuing uncirculated silver eagles due to production problems with the silver rounds.
As it has been pointed out to me, there are 3 types of silver eagle programs initiated by the mint:
1. highly polished and specialized proofs.
2. uncirculated silver oz eagles.
3. regular 1 0z bullion which is not highly polished or uncirculated.
The mint can suspend the first 2 but cannot by law stop the 3rd as it is compulsory for them to mint bullion coins with available silver from the usa.
I hope I got this straight, It I didn't, send me an email on this and I will correct./
I will give you a few big stories to ponder over the weekend.
First this big story on Italy: (the author is Ambrose Pritchard Evans from the UKTelegraph)
Subject: Italy's debt costs approach red zone - Telegraph
Italy's debt costs approach red zone
Italy's borrowing costs have jumped to the highest level since the financial crisis over two years ago, raising concerns that Europe's biggest debtor may slip from the eurozone's stable core into the high-risk group on the periphery.
Yields on 10-year bonds rose 10 basis points to 4.86pc after a poor auction of short-term debt in Rome. The Italian treasury had to pay 1.7pc to sell €8.5bn (£7.2bn) of six-month bills in a thin post-Christmas market, up from 1.48pc a month ago.
The spike in rates came as money supply data released by the European Central Bank showed that real M1 deposits have collapsed at a rate of 2.8pc over the last six months in the EMU bloc of Italy, Spain, Greece, Ireland and Portugal, even though they are rising in northern Europe.
"This is comparable with the decline in early 2008 just ahead of the plunge into recession," said Simon Ward from Henderson Global Investors. "The eurozone periphery is locked into a 'double dip' that will undermine fiscal consolidation."
Italy's M1 contraction began later than elsewhere in southern Europe but is now accelerating. M1 typically gives advance warning of economic shifts by six to nine months.
Mr Ward said signs of recovery in the ECB's broader M3 money data is less reassuring than it looks since the gauge was temporarily boosted by flight to liquid assets on EMU debt worries.
The poor auction in Rome may be a warning sign that EU leaders offered too little to restore confidence at their Brussels summit two weeks ago.
German Chancellor Angela Merkel vetoed the creation of eurobonds or any serious move towards fiscal union, and shot down calls for an increase in the eurozone's €440bn emergency loan fund. The ECB has so far refused to step in to the breach with overwhelming action.
Willem Buiter, Citigroup's chief economist, said the response had been "woefully inadequate", raising the risk of fresh bank failures and a wave of sovereign defaults next year. He said the EU authorities may need a mix of measures worth up to €2 trillion to stop the rot.
Italy avoided the sort of property bubble seen in Spain or Ireland and has kept a tight rein on public spending under finance minister Giulio Tremonti. However, the rise in yields looks ominously like the pattern seen in Greece, Ireland, Portugal and Spain when they first began to lose easy access to the capital markets.
Neil Mellor, currency strategist at the Bank of New York Mellon, said big institutional investors have been pulling funds out of Italy and rotating into German debt on a large scale. "Our flow data shows that the trend has been just as concerted out of Italian debt as it has been out of Irish or Greek debt. Italy should be able to weather 2011 in good shape but the government's debt dynamics are very poor," he said.
Italy is too big to be rescued by a diminishing group of creditor states in the EMU core, should it ever need help. Public debt will creep up to 120pc of GDP next year – or over €1.9 trillion – a level widely seen as the outer limit of debt sustainability.
The country's trump card is a high savings rate and low private debt. Total debt is 245pc of GDP, below the eurozone average, and much lower than in Spain, Britain, the US or Japan. This may be the relevant indicator for an economy as a whole.
However, low private debt may equally reflect deep pessimism in a country where growth has been glacial for a decade, productivity has fallen since 1995, and global export share is in steep decline.
As we enter the year 2011, we must watch with "eagle" eyes, the massive inflation which will fall upon us. John Crudele of the NY post delivered this commentary at the post yesterday:
Gasoline fuels myth that spending is on the rise MasterCard Advisors said retail sales soared 5.5 percent this holiday season, excluding car sales. Clueless journalists gushed that "the consumer is back."
Even one careful analyst on the economy cheered in his newsletter that this was the largest increase in five years amid an "orgy of consumerism."
Seriously, does anyone really think consumers went crazy this Christmas? With unemployment at 9.8 percent? It really doesn't make sense. So I asked MasterCard Advisors whether its numbers excluded gasoline sales, which are only increasing because of an unhealthy spike in prices.
I received this clarification from a spokesman for MasterCard Advisors: "The 5.5 percent increase during the period Nov. 5 through Dec. 24 is a total retail . . . number, so it'll include food, restaurants and gasoline. SpendingPulse measures total retail the same way that the Department of Commerce does."
Look closer at the survey of that 0.8 percent sales gain in November and it's even worse. When I asked, the Census Bureau said that a 4-percent jump in the price of gasoline had accounted for 0.3 percentage points.
So we don't know how much of Christmas sales were really wasted on the inflated prices of products that would have been purchased anyway -- gasoline but also food and especially clothing, which has been jumping in price along with the price of cotton…
The Energy Department says gas prices went from a nationwide average of $2.91 a gallon in mid- November to $3.05 a gallon around Christmas time. That's a 4.8-percent increase and indicates that a lot of this holiday's spending wasn't for the purpose of joyful gift- giving but rather went toward filling Luke's pickup.
I thought that this video on silver is terrific for our beginners trying to understand the mechanics of this important metal:
John Williams has given his forecast for the coming year. He has never been wrong yet: (courtesy of J Williams and Jim Sinclair)
Here is how John Williams sees things.
- 2010: A Year of Depressed Economic Stagnation
- 2011: A Year of Increasing Economic and Systemic Difficulties
- Gold Outperforms Dow for Seventh Straight Year (2010)
"No. 342: Economic, Market and Systemic Outlook for 2011"
Jim Sinclair's Commentary
In the spirit of recommending resources to you, consider the following.
GEAB N°50 is available! Global systemic crisis: Second half of 2011 – European context and US catalyst – Explosion of the Western public debt bubble
- Public announcement GEAB N°50 (December 16, 2010)
The second half of 2011 will mark the point in time when all the world's financial operators will finally understand that the West will not repay in full a significant portion of the loans advanced over the last two decades. For LEAP/E2020 it is, in effect, around October 2011, due to the plunge of a large number of US cities and states into an inextricable financial situation following the end of the federal funding of their deficits, whilst Europe will face a very significant debt refinancing requirement (1), that this explosive situation will be fully revealed. Media escalation of the European crisis regarding sovereign debt of Euroland's peripheral countries will have created the favourable context for such an explosion, of which the US "Muni" (2) market incidentally has just given a foretaste in November 2010 (as our team anticipated last June in GEAB No. 46 ) with a mini-crash that saw all the year's gains go up in smoke in a few days. This time this crash (including the failure of the monoline reinsurer Ambac (3)) took place discreetly (4) since the Anglo-Saxon media machine (5) succeeded in focusing world attention on a further episode of the fantasy sitcom "The end of the Euro, or the financial remake of Swine fever" (6). Yet the contemporaneous shocks in the United States and Europe make for a very disturbing set-up comparable, according to our team, to the "Bear Stearn " crash which preceded Lehman Brothers' bankruptcy and the collapse of Wall Street in September 2008 by eight months. But the GEAB readers know very well that major crashes rarely make headlines in the media several months in advance, so false alarms are customary (7)!
I have highlighted this gentlemen's commentaries to you in the past. Today it talks about hyperinflation and how it will affect us as the world prints massive amounts of paper backing nothing: The author is Egon Von Greyerz out of Switzerland.
HYPERINFLATION WILL DRIVE GOLD TO UNTHINKABLE HEIGHTS
by Egon von Greyerz
We now live in a world where governments print worthless pieces of paper to buy other worthless pieces of paper that combined with worthless derivatives, finance assets whose values are totally dependent on all these worthless debt instruments. Thus most of these assets are also worth-less.
So the world financial system is a house of cards where each instrument's false value is artificially supported by another instrument's false value. The fuse of the world financial market time bomb has been lit. There is no longer a question of IF it will happen but only WHEN and HOW. The world lives in blissful ignorance of this. Stockmarkets remain strong and investors worldwide have piled into government bonds in a perceived flight to safety. Due to a century of money creation (and in particular since the 1970s) by governments and by the fractal banking system, investors believe that stocks, bonds and property can only go up. Understanding risk and sound investment principles has not been necessary in these casino markets with guaranteed payouts for anyone who plays the game. Maximum leverage and derivatives have in the last 10-15 years driven markets to unfathomable risk levels, with massive rewards for the participants.
In the meantime central banks are cranking up the printing presses but as Bernanke recently said quantitative easing is an "inappropriate" description of what should be called "securities purchases"! Who is he kidding? What the Fed is buying has nothing to do with "securities". There is no security whatsoever in the rubbish the Fed is purchasing. They are buying worthless pieces of paper with worthless pieces of paper. This is the Ponzi scheme of all Ponzi schemes.
Let us be very clear, this financial Shangri-La is now coming to an end. The financial system is broke, many western sovereign states are bankrupt and governments will continue to apply the only remedy they know which is issuing debt that will never ever be repaid with normal money.
Here are some inflationary problems surfacing around the globe, from Bolivia, to India and other places: (courtesy Jim Sinclair)
Bolivians protest fuel price hike
Fri Dec 31, 2010 6:57AM
Thousands of demonstrators have taken to the streets across Bolivia to protest the recent jump in fuel prices in the country.
Protesters marched through the streets in capital La Paz and other cities across Bolivia on Thursday, demanding from the government of President Evo Morales to repeal the hike.
The demonstration in La Paz started peacefully but turned violent after police prevented protesters from entering the main plaza where the presidential palace is located, AP reported.
Petrol price could rise in January
December 29 2010 at 01:04pm
The price of petrol could increase by 25 cents a litre next week on Wednesday due to the rise in the international price of oil since November 26, the latest calculations issued by the state-owned Central Energy Fund released on Wednesday showed.
From December 1, the price of petrol at the coast was set at R8.21 a litre and the inland price was established at R8.45 a litre.
The next change to the local petrol prices will be made on Wednesday, January 5, and will be based on the average over or under recovery in the petrol price from November 26 to December 30.
Fuel price rise adds to inflationary pressure
15 Dec, 2010, 02.03PM IST,REUTERS
MUMBAI: Moves by state-run oil retailers to raise petrol prices and the possibility that diesel will increase too make the Reserve Bank of India's (RBI) fight against inflation more difficult and piles more pressure onto a beleaguered government.
Indian Oil Corp , Bharat Petroleum and Hindustan Petroleum will raise petrol prices by about 5.6 per cent this week due to surging global crude prices. Shares in the companies rose early on Wednesday.
The Reserve Bank of India meets this week to review its monetary policy in the light of still high inflation.
I found this blog pretty good as it describes the lull before the storm. It is a good read:
I think that about does it for this New Year's day commentary.
Enjoy your holiday weekend.