Friday, August 19, 2011

Gold closes at another record level/silver regains former strength rising to$ 42.43

Good morning Ladies and Gentlemen:

Before commencing with my commentary, I would like to introduce to you 4 new members into our banking morgue.  Two of the banks, Lydian Private Bank of Palm Beach Florida and Public Savings Bank of Huntingdon
Valley PA got a good headstart by failing Thursday night. Last night we lost another two banks:

1. First Choice , Geneva, Illinois
2. First Southern Nation Bank (Statesboro GA).

Therefore we lost 4 banks these past two days.

The price of gold hit another record close Friday at the comex coming in at a respectable close of $1848.90 for a gain of $30.00.  Silver however was the standout as it rose $1.74 despite the shackles at its feet.
It closed the comex session at $42.43.

Here are the final prices of gold and silver in the access market:

gold:  $1853.10
silver:  $42.90

Let us head straight to the comex and assess the trading for our precious metals.

The total gold OI rose by only 6633 contracts despite the huge rise in this ancient metal of king.
Actually this metal is now now regaining its title of king of all metals as gold surpassed both Platinum and Rhodium in price today.  Two years ago I remember that Rhodium was trading over 10,000 dollars per oz.
Both Platinum and Rhodium finished the session at $1850.00.  Gold in the access market finished at $1853.00.  The bankers must have been scared to be the supplier of much of the non backed gold paper as they sensed the run-away gold train and they are following the old saying  "never stand in the way of a moving freight train".  The October OI remains almost identical at 27,404.  The next big delivery month after October is December and here the OI continues to gain strength rising by over 5000 contracts to 368,836.
The estimated volume at the gold comex today was monstrous at 303,325.  The confirmed volume yesterday was also superb at 271,845.  It was quite a day for gold.

Lets see how silver fared.  The total OI surprisingly fell by 1130 contracts despite silver's rise.
The bankers have been seen standing on window ledges ready to end their misery with their massive silver shortfall.  The front options expiry month of August saw its Oi fall from 26 to 6 for a drop of 20 contracts.
We had exactly 20 deliveries on Thursday so the entire drop in OI was due to those deliveries and we lost zero ounces to cash settlements.  The next big delivery month is September and here the OI fell by a tiny 1200 contracts to 37,707.  We have less than 2 weeks before first day notice and the front month is not contracting at all.  The bankers are very nervous on this and may be the reason they are exiting their shorts. The estimated volume on the silver comex yesterday was also a monster day coming in at 97,768 contracts.
The confirmed volume on Thursday was also good at 64,296.  It looks like we have renewed spec interest in silver.

nventory Movements and Delivery Notices for Gold:  August 20.2011:

Withdrawals from Dealers Inventory in oz
Withdrawals fromCustomer Inventory in oz
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
124,420 (HSBC,Manfra)
No of oz served (contracts)  today
11100 (111)
No of oz to be served  (notices)
 53000 (530 )
Total monthly oz gold served (contracts) so far this month
 644,300 (6443)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month
588,166 oz

The gold vaults again saw no gold enter the dealer and no gold leaving the dealer.

The customer received the following:

1.  Into HSBC   122,652 oz

2.  Into Manfra;  1768

total deposit to the customer;  124,420 oz

There were no withdrawals by the customer.

Thus the total registered gold remains at 1.796 million oz.

The comex folk notified us that 111 notices were filed for 11100 oz of gold. The total number
of gold notices so far this month total 6443 for 644,300 oz .  To obtain what is left to be served upon, I take the OI standing  (641) and subtract out yesterday's deliveries (111) which leaves me with  530 notices or 53000 oz left to be served upon.

Thus the total number of gold oz standing in this delivery month is as follows;

644,300 oz (served)  +  53000 oz (to be served)  =  697,300 oz
On Thursday we had:  692,100 so we gained over 5000 oz standing.

And now for silver 

First the chart:

Withdrawals from Dealers Inventory nil
Withdrawals fromCustomer Inventory 814,916 (  Scotia ,HSBC)
Deposits to theDealer Inventory nil
Deposits to the Customer Inventory6030 (Delaware) 
No of oz served (contracts) 5,000  (1)
No of oz to be served  (notices)25,000  (5)
Total monthly oz silver served (contracts) 3,335,000  (667)
Total accumulative withdrawal of silver from the Dealers inventory this month 152,218
Total accumulative withdrawal of silver from the Customer inventory this month 6,675,477

Again no silver entered as a deposit to the dealer and no silver left as a withdrawal.

The customer had only a tiny deposit to the Delaware vault:  6030 oz

The customer had sizable withdrawals:

1. a huge 802,911 oz from Brinks
2. a smallish 12,050 from HSBC

total withdrawal by the customer;  814,916 oz

We had another huge adjustment from the customer to the dealer in an obvious lease arrangement:

913,334 oz leaving a customer and entering the dealer's vault  (Scotia)
The total dealer inventory rises to 30.418 million oz and the total of all silver falls to 105.694 million oz

The comex folk notified us that only one notice was filed for Friday for 5000 oz.
The total number of notices thus rises to 667 or 3,335,000 oz.  To obtain what is left to be served,
I take the OI standing for August (6) and subtract out Friday's deliveries (1) which leaves me with 5 notices or 25,000 oz left to be served upon.

Thus the total number of silver oz standing in this non delivery month is as follows:

3,335,000 (served oz)  +  25,000 oz (to be served)  =  3,360,000 oz (exactly the same as Thursday.

Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:

Sprott and Central Fund of Canada.

 The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.
Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.

First GLD inventory changes:  August 20.2011.

Total Gold in Trust

Tonnes: 1,290.76
Value US$:

Total Gold in Trust: Aug 18.2011:

Tonnes: 1,286.83
Value US$:

we gained a huge 3.93 tonnes of gold into the GLD.  The Bank of England is getting quite nervous as it needs to repatriate this gold back.  No wonder physical gold is on fire.  With the leverage on the paper gold at 100 to one the repatriation of 99 tonnes of gold from the B. of E to Venezuela will cause 9900 tonnes of paper gold to be unwound and bought back.  This is why I told you the fun would begin on this announcement and you can see the results for yourself.

Now let us see inventory movements in the SLV:  August 20:2011

Ounces of Silver in Trust313,318,164.100
Tonnes of Silver in Trust Tonnes of Silver in Trust9,745

august 18.2011:

Ounces of Silver in Trust313,318,164.100
Tonnes of Silver in Trust Tonnes of Silver in Trust9,745.28

Surprisingly we gained no silver into the SLV vaults.

1. Central Fund of Canada: it is trading at a positive 2.1 percent to NAV in usa funds and positive 2.1% in NAV for Cdn funds.  ( aug 20.2011).  
2. Sprott silver fund  (PSLV):  Premium to NAV stayed at a  positive 19.58% to  NAV August 20.2011
3. Sprott gold fund (PHYS): premium to NAV lowered a bit  to a  4.79% to NAV  August 20.2011).

Note:  central fund of Canada is probably a good buy as it has little premium.

Note:  Sprott silver still commands a huge premium in silver.
Note:  the Sprott gold is now turning to a fair sized premium to NAV as  Sprott navigates the globe looking for his 6.6 tonnes of gold  His purchase looks very good now.

Finally it looks like Central Fund of Canada is gaining some respect.

the world is still seeking the physical stuff.


On  Friday evening we got the release of the COT report.

First gold:   (reporting period August 9 through August 16)

COT Gold, Silver and US Dollar Index Report - August 19, 2011

-- Posted Friday, 19 August 2011 | Share this article | Source:

Gold COT Report - Futures
Large Speculators
Change from Prior Reporting Period

Small Speculators

Open Interest



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, August 16, 2011

In gold we witnessed the large specs that have been long in gold added another 4566 contracts to their long side and are greatly rewarded for their efforts as gold skyrocketed these past few days.


The large specs that have been short gold decided on mass to increase their shorts by a huge 8083 contracts as the thinking here was gold was going to be attacked because of options expiry. 

These guys are the doorknobs that supplied the non backed gold paper and are crying the blues this weekend.

And now for our commercials:

Those commercials that have been long in gold lightened up a bit on their longs to the tune of
2910 contracts and they are also a sorry bunch this weekend.

Those commercials like JPMorgan and friends who are perennially short gold reduced another 3269 contracts to their short position.  A commercial failure for the first time is shinning brightly tonight as our bankers are backed into a corner.  Their shortfall is just too great.

The small specs that have been long gold also got it wrong this week as they lightened up on their longs to the tune of  2428 contracts.

The small specs that have been short gold did see the light and covered a rather large for them, 5556 contracts.

Conclusion:  the commercials are still supplying some paper but not to the same extent as before.
I view this as still very bullish.

Let us see how the COT silver fared:

Silver COT Report - Futures
Large Speculators

Small Speculators

Open Interest



non reportable positions
Change from the previous reporting period

COT Silver Report - Positions as of
Tuesday, August 16, 2011

The large specs that have been long in silver added a tiny 596 longs to their already high long position.  These guys are very determined and are considered to be in very strong hands.
The large specs that have been short in silver did not like the lay of the land and covered 2944 short contracts and are very thankful for their efforts.
Those commercials who have been long in silver and are close to the physical scene somehow missed the signals by covering 1839 long contracts and they are very sorry they did it.
Those commercials who have been short in silver like JPMorgan and friends, added a monstrous 3501 contracts to their shortfall and are crying the blues tonight with the huge run up in silver prices.
I smell a commercial failure here.
Forget about the small specs in silver, they were blown out in May with the huge margin hikes.

For a little heads up for Monday:

the gold deliveries  42
silver deliveries:  1
Looks to me like they are going to the wire on deliveries.


Let us see the big news that shaped the price of gold and silver yesterday.
The market did not like this news report from good old JPMorgan who now states that 4th quarter GDP will grow by only 1%:  (courtesy Bloomberg and JPM's Mike Feroli)

JPMorgan Cuts U.S. GDP Growth ForecastBy Scott Hamilton - Aug 19, 2011 6:03 AM CT
The U.S. economy may expand less than previously thought in the next two quarters as consumer sentiment drops and the housing market fails to gain momentum, JPMorgan Chase & Co. wrote in a report.
Gross domestic product will grow 1 percent in the fourth quarter rather than the 2.5 percent previously forecast and 0.5 percent in the first quarter of 2012 instead of 1.5 percent, Michael Feroli, JPMorgan’s chief U.S. economist in New York, said in an e-mailed note to clients today.

Zero Hedge weighs in on the Goldman announcement of a low GDP 4th quarter expectation:

Goldman Cuts Q3 Growth Forecast In Half, Sees Q3, Q4 GDP At 1.0%, 1.5%, Presents Jackson Hole Event Walk Thru

Tyler Durden's picture

Sorry Goldman, in the race to downgrade the US to 0.0001% above contraction, you are still well behind The Fonz in coolness. Frankly, following your December 2010 report you are not even cool enough to pass off for Richie Cunningham. But your third downgrade of US GDP in a month, this time slashing Q3 and Q4 GDP is surely a valiant attempt at regaining some of the Fonz pre-Jersey Shore panache. Keep at it. Another year of being just thiiiiis much behind the curve, and atoning for your shark jumping adventures, and you may be cool again. From a just released report by recent addition to the Goldman economics team (supposedly Jan was too busy elsewhere) Zach Pandl: "In light of the downshift in the data this week, we are cutting our second-half growth forecasts further. We now expect GDP growth of 1.0% in Q3 and 1.5% in Q4, both down from 2.0% previously. These changes reduce our forecasts for full-year 2011 GDP growth to 1.5% from 1.7%. Exhibit 1 shows the details." Now: who will join Zero Hedge in calling for negative GDP in Q3 and most likely Q4 (absent QE3; with QE3 the BEA will mysteriously find another 4-5 GDP percent hidden under the carpet). Far more importantly, Goldman once again explains what to expect at next week's Jackson Hole. We say importantly, because while Goldman is about as clueless at most at predicting the future, when it comes to monetary policy, Goldman determines it. So it is always useful to pay attention: after all Hatzius "predicted" the QE2 announcement roughly about a year ago to the dot.
On cutting GDP:
From already quite low growth rates, it appears that the US economy is losing further momentum. According to our Current Activity Indicator (CAI), underlying growth was about 1.5% (annual rate) as of July, and several major indicators for last month— nonfarm payrolls, retail sales, industrial production— were surprisingly strong. However, timelier survey- based data have turned down sharply, and weakness in the hard statistics seems likely to follow with a lag.

It is true that data on August activity is still relatively limited at this point. But of the major indicators released so far, one was weak (the Empire State index) and two were exceptionally weak (Consumer Sentiment and the Philadelphia Fed index). The most positive signal has come from jobless claims, which are roughly unchanged from last month and down from the spring. The survey data could potentially have been biased downward by volatility in financial markets and the contentious debate over the debt limit. But we do not want to take that argument too far: these are important cyclical indicators, and they are pointing to even weaker growth ahead. Updating the model from last week's US Economics Analyst with the latest data on equity prices and housing starts and an estimated value for the August ISM gives a probability of about one-third that the economy is currently in recession.

In light of the downshift in the data this week, we are cutting our second-half growth forecasts further. We now expect GDP growth of 1.0% in Q3 and 1.5% in Q4, both down from 2.0% previously. These changes reduce our forecasts for full-year 2011 GDP growth to 1.5% from 1.7%. Exhibit 1 shows the details.
And on what to expect next week:
Will Bernanke Move Mountains?

Against this challenging backdrop, Chairman Bernanke will deliver his address to the Fed’s annual Jackson Hole Conference next week.2 Given rising recession risks, worsening financial market conditions, and the FOMC’s surprisingly aggressive moves at its last meeting, investors are probably right to be focusing intensely on the event. We expect his speech to contain three main elements: 

1. Discussion of the dimmer growth outlook. The statement from the last FOMC meeting made clear that the committee made a significant change to its growth forecasts. The statement said that growth had been “considerably slower” than expected this year, that temporary factors “account for only some of the recent weakness”, and that “downside risks to the economic outlook have increased”.

The speech will be an opportunity for Bernanke to describe the Fed’s revised view in more detail. While he is likely to be downbeat about recent developments, we expect that he will still argue that the conditions for an acceleration later this year and in 2012 remain in place. The last post-meeting statement said    the    committee    “anticipates    that    the unemployment rate will decline only gradually”, which hints at a slightly above-trend growth outlook.

Recent comments from other Fed officials have been moderately constructive on growth. For instance, Cleveland Fed President Pianalto said earlier today that she expects growth of about 2% this year and 3% in 2012. New York Fed President Dudley also said this week that recent data were “at worst mixed”, and that growth will be “significantly firmer” in the second half. With annualized GDP growth in the first half of 0.8%, this is not an especially optimistic view, but it suggests Bernanke could sound positive relative to the current market consensus.

2. Defense of earlier policy actions. Weakness in growth and renewed questions about Fed easing have naturally raised questions about the effectiveness of its tools. We expect that Bernanke will address this issue directly in his speech, as he did in Congressional testimony last month. At that time, Bernanke argued that quantitative easing (QE) was effective in reducing the risk of deflation, emphasizing the rise in market- based measures of inflation expectations. He also said QE was helpful in “shoring up economic activity”.

It may be difficult for Bernanke to lean on these arguments today. The weakness in activity—and especially the downward revisions to GDP in late July—casts doubt on the claim that asset purchases have stimulated growth, at least in the eyes of many observers. Inflation expectations remain around levels consistent with the Fed’s target, but if higher inflation expectations are the only impact from QE, it would make little sense to ease now.

We think Bernanke will stick to a few main points. First, he will probably reiterate that the Fed’s expectations for the impact of QE were low, and therefore that slow growth does not necessarily imply that QE failed. At last year’s Jackson Hole speech he said that “central bankers alone cannot solve the world’s economic problems”; a repeat of this type of language seems likely. Second, he could argue that securities purchases ward off the tail risk of deflation, and that if the economy slipped into recession, deflation risk would return. Third, we think he could again list the many studies about QE and their quantitative estimates of the impact on growth. Emphasizing the positive effects of past asset purchases would implicitly help justify further action. 

3. Review of the easing options. The Fed has three main easing tools: 1) communication; 2) asset purchases; and 3) cutting the interest rate on excess reserves. At the August meeting, it exercised option #1 by making a conditional commitment to keep the funds rate low until mid-2013. Option #3 is often mentioned but in our view is unlikely for several reasons. That leaves only option #2, asset purchases.
We believe Bernanke’s Jackson Hole speech will include a detailed discussion of the potential for more easing through large-scale asset purchases. A variety of indicators suggest many investors already expect more QE. For instance, a recent CNBC survey shows that more than $300bn of purchases may already be priced in. The sharp decline in forward real rates is also partly related to QE expectations, in our view (Exhibit 2).5 Based on our conversations with clients, we believe investors would be very surprised if the speech did not include a discussion of asset purchases.

We see two main reasons why Fed officials may prefer to change the composition of the balance sheet as a first step. First, as we showed in Monday’s US Daily, if used aggressively this could have a sizable impact. For example, if the Fed were to sell its Treasury securities that mature over the next two years and buy securities in the 10- to 30-year part of the curve—apportioning them based on amounts available in the market—it could take a similar amount of duration risk onto its balance sheet as in QE2 (around $350bn in 10-year equivalent terms, or 80-90% of QE2). The policy could be scaled up further by weighting purchases toward even longer maturities, or by changing the mix of the mortgage portfolio.

Second, policies that keep the size of the balance sheet (and excess reserves) unchanged may be less controversial among politicians and the broader public. A detailed discussion of possible changes in balance sheet composition seems a likely component of the Jackson Hole speech.

Bernanke may of course also discuss conventional QE. Arguments in favor of this approach include a less complicated exit strategy—if securities mature faster, the Fed may not need to sell actively—and potentially a larger impact on confidence and expectations. We do not think Bernanke will signal anything more unconventional, such as a higher inflation target, price level targeting, or a long-term interest rate target.6 However, these ideas may turn up in the FOMC minutes published on August 30. 

While listing the easing options looks probable, Bernanke is very unlikely to pre-commit to taking action next week. This is a monetary policy decision, and any announcement would come at an FOMC meeting. In addition, core inflation continues to accelerate, and Fed officials seem to have a rosier outlook than our forecast or the consensus. While we expect additional QE and the odds are rising at the margin, it is not yet a done deal.
Remember: central bank policy only works when it is a surprise.

How about this story from Fed president Sandra Pianalto:

(courtesy Dow Jones Newswires)

US Recession Was Worse Than We Thought - Fed's PinaltoBy Cynthia Lin
The magnitude of the recession caused by the 2008 financial crisis is taking a bigger toll on the U.S. economy than most had expected, a U.S. central bank official said Friday, adding she was in favor of providing the nation's recovery with more support at the latest Federal Reserve meeting.
"The economy appeared to be strengthening, and yet once again, in the summer, storm clouds appeared," said Cleveland Federal Reserve Bank President Sandra Pianalto. "We learned that the magnitude of the recession was worse than we had thought."
In a speech to a community bankers association in Ohio, Pianalto said the U.S. has to grow by about 2.5% annually in order to keep the unemployment rate, currently at a towering 9.1%, from rising. She said it will take "quite a few years" to get that rate down to around 5.5%.
The central banker lowered her outlook on U.S. growth and sees inflation falling back to 2%. Given those projections, Pianalto said she was in favor of providing additional support to the recovery at a Federal Open Market Committee meeting earlier this month. She does not hold a voting slot on the monetary policy-setting FOMC.
With the targeted federal funds rate already near zero, Pianalto said the Fed explicitly announcing a mid-2013 time frame to stick to its loose monetary policy was a tool to help bring down interest rates along the yield curve.
"Under the circumstances, I think it made sense to take the unprecedented step of including that conditional guidance in our press statement," she said.
Pianalto now sees the economy growing at about 2% in 2011, and 3% in each of the next two years. In June, Pianalto said she expected the economy to grow at about 3% a year.
The Fed official points out that between June and August, several pieces of economic data showed a deteriorating labor market, tapering household spending and a still-depressed housing sector, suggesting that the U.S. was in store for a slower pace of recovery in the coming quarters than most expected.
With unemployment stubbornly high, consumer confidence falling and households expecting their income to decline in the next year, Pianalto said people are focused on rebuilding their wealth, not spending it.
"I put all of these facts together; I do not expect much of an economic boost from consumer spending any time soon," Pianalto said.
Turning to inflation, Pianalto sees inflation averaging around 2% in 2012 and 2013, expecting the pressures of rising food and energy costs to abate over time.

  This will have serious impact on the economy as S andP is now on a roll as they may downgrade Muni bonds:  (courtesy Standard and Poor):
Municipal Bonds May Face Downgrades Following Final U.S. Budget, S&P SaysStandard & Poor’s, the credit rating company that cut the U.S. to AA+, said the federal budget deal may lead to downgrades on municipal credits.
The company, which said earlier this month that states and local governments could remain AAA even after the U.S. cut, said in a report today downgrades could come after reductions in federal funding or changed policy. Ratings changes would come based on "differing levels of reliance on federal funding, and varying management capabilities," and, after the Budget Control Act of 2011, will be felt "unevenly across the sector," S&P said.
"Experience tells me I would expect there to be some downgrades," said S&P credit analyst Gabriel Petek in a telephone interview. "These cuts are coming in addition to the losses of revenue that already came during the recession."
The initial budget cuts would be smaller than the revenue losses during the recession that ended June 2009, he said. States lost $67 billion in aggregate during the 18-month contraction, the report said. The federal government has planned $7 billion in cuts, most of which won’t be implemented until 2013, giving states some time to prepare, Petek said.
S&P will begin evaluating states and local governments starting Nov. 23, when a panel of 12 members of Congress, split evenly between Republicans and Democrats, is supposed to come up with recommendations, Petek said.
Federal Funding
In 2009, when the U.S. introduced economic stimulus, federal spending on average was 24.6 percent of state gross domestic product, the report said. States that had federal funds representing more than 30 percent of GDP included Alabama, Alaska, Hawaii, Kentucky, Maryland, Montana, Mississippi, New Mexico and West Virginia. The state with the lowest percentage was Delaware.
"We do not have immediate concerns at the state and local levels," said Natalie Cohen, managing director and senior municipal-bond analyst for Wells Fargo Securities, in an Aug. 16 report.
The 11,500 municipal bonds already downgraded from AAA in lockstep with the U.S. were a "logical extension," and "not a symptom of a meltdown in the municipal-bond market," she wrote. The debt was directly dependent on federal funding.S&P mentioned possible changes to the municipal market if tax policy is altered. If tax cuts enacted during George W. Bush’s presidency are allowed to expire, federal taxes would increase and the tax exemption on municipal bonds would be more attractive to investors and drive yields on municipal bonds lower, S&P said.
Alternatively, Congress could limit some of the tax exemptions on municipal bonds to raise more government revenue, which would likely increase interest costs, S&P said.

Two days ago we get a whistleblower in the SEC who told Matt Tiabbi of Rolling Stone Magazine about the destruction of complaints by individuals.  Yesterday we get a Moody's official who states that his company is "Rotten to the core"   (courtesy business insider)
MOODY'S ANALYST BREAKS SILENCE: Says Ratings Agency Rotten To Core With Conflicts, Corruption, And GreedA former senior analyst at Moody's has gone public with his story of how one of the country's most important rating agencies is corrupted to the core.
The analyst, William J. Harrington, worked for Moody's for 11 years, from 1999 until his resignation last year.
From 2006 to 2010, Harrington was a Senior Vice President in the derivative products group, which was responsible for producing many of the disastrous ratings Moody's issued during the housing bubble.
Harrington has made his story public in the form of a 78-page "comment" to the SEC's proposed rules about rating agency reform, which he submitted to the agency on August 8th. The comment is a scathing indictment of Moody's processes, conflicts of interests, and management, and it will likely make Harrington a star witness at any future litigation or hearings on this topic.
The primary conflict of interest at Moody's is well known: The company is paid by the same "issuers" (banks and companies) whose securities it is supposed to objectively rate. This conflict pervades every aspect of Moody's operations, Harrington says. It incentivizes everyone at the company, including analysts, to give Moody's clients the ratings they want, lest the clients fire Moody's and take their business to other ratings agencies.
Read more:


Ladies and Gentlemen:  get ready for this..another hike in gold like that of silver.
This will temporarily cause gold to fall but eventually this metal will find stronger and stronger hands like that of silver:

Interactive Brokers Warns Gold Margin Hike Imminent, CME Next?

Tyler Durden's picture

The first shot was just fired in today's battle with daily record gold prices. IB always tends to be a few minutes ahead of the CME. And following last week's 22% margin hike in gold, we are confident the CME will do everything in its power to pull a "silver" on gold. Are we about to experience a barrage of margin hikes in gold? Stay tuned and find out.
Interactive Brokers bulletin board

Fri Aug 19 13:29:35 2011 EST

As a result of the volatile trading environment at the present
time, please be advised that Exchange margins and House margins are
likely to increase over the next couple of days. For exchange-
specific increases, please visit the respective websites. IB will
also be increasing the gold derivatives margin. Please monitor any
affected holdings closely and manage your risk accordingly.


Mark O'Byrne has his take on the Venezuela repatriation of gold.
He has noticed a slight backwardation in the price of gold:

Perfect Storm Sees Gold & Silver Surge – Chavez Gold Action Leads to Backwardation, Short Squeeze and ‘Havoc’ Concerns

Published in Market Updates  Precious Metals Update  on 19 August 2011

All major currencies have fallen sharply against gold and silver again today with gold reaching new record nominal highs in Canadian and New Zealand dollars, in sterling, in euros and of course in dollars as turmoil continues in global markets.
In volatile trade, gold is down 1% from new record highs and is trading at USD 1,860.10, EUR 1,300.40, GBP 1,126.40, CHF 1,470.90, and JPY 142,414 per ounce and has risen some 2% in all currencies. Silver has surged by nearly 3% in all major currencies.
Cross Currency Table
The London AM fix was a third consecutive record nominal high in US dollars. Gold’s London AM fix this morning was USD 1,862, EUR 1,299.28, GBP 1,126.91 per ounce (from yesterday’s USD 1,794.50, EUR 1,246.44, GBP 1,087.12 per ounce).
Markets continue to assess the ramifications of Venezuela deciding to repatriate their large gold reserves from London to Caracas. Their reserves are large in gold tonnage terms but small in dollar terms.
Venezuela’s central bank is the world’s 15th largest holder of gold, with 365.8 tonnes, of which some 211 tonnes, worth $12.3bn are held in London with the Bank of England and JP Morgan, Barclays, and Bank Of Nova Scotia.
Many analysts and the Gold Anti-Trust Action Committee (GATA) have long contended that much of the central bank gold reserves have been leased out by bullion banks and that in the event of central banks choosing to repatriate their bullion, significant supply issues could develop which would lead to a short squeeze and a parabolic increases in prices. 
The concern is that other central banks concerned about dollar and currency debasement and expropriation of their gold reserves by embattled large debtor sovereign nations may follow suit.
A short squeeze is quite likely given the scale of global investor and central bank demand.
Already, there is a small degree of backwardation developing in the gold market with certain near term futures contracts now trading at higher prices than longer term contracts. The near term August ’11 contract was trading at $1,871.40/oz while June ’12 contract is trading at $1,870/oz (12:16 GMT). The spread between spot and longer term contracts has fallen suggesting that gold may soon join silver in backwardation. 
Silver has been in backwardation for seven months now and backwardation appears to be deepening again. This morning the September ‘11 contract is trading at $41.41 while December ‘12 is trading at $40.65.
The possibility of backwardation in gold suggests that major investors are concerned about the supply of physical gold. Buyers are concerned about securing supply in the future and are willing to pay a premium for spot or immediate delivery.
It could indicate that the short squeeze anticipated by many is taking place and we could see a sharp upward move in gold prices.
This would not be surprising considering the very small size of the physical bullion markets versus the size of the overall financial and currency markets and considering the high demand coming from investors and central banks globally.
It is worth remembering what happened when silver went into backwardation some months ago. It led to a price surge from $30/oz to over $50/oz in 10 weeks.
Backwardation rarely happens in the gold and silver bullion markets. Since gold futures first started to be traded in 1972 (on the Winnipeg Commodity Exchange), there have only been momentary backwardations of a few hours. 
It suggests that larger gold bars are difficult to acquire in volume and that the physical market is becoming stressed and less liquid. 
Backwardation can end in default, failure to make delivery and in sharply higher prices. A default on the COMEX would have important ramifications for the dollar and could see sharp selling of the dollar and sharp falls on global markets. 
Gold backwardation has been warned of by newsletter writer Denis Gartman overnight. He said that if Chavez  “does push” for repatriation of $11 billion of gold reserves held in developed nations’ institutions it could lead to backwardation which would wreak ‘havoc’.
Investors should buy “nearer gold” and sell deferred bullion futures, he wrote. October and December futures will trade to premium over February and beyond in this case, Gartman wrote.
Meanwhile, in another sign of gold experiencing a near perfect storm, UBS have said that macro hedge funds were noted buyers and may also have dominated demand during yesterday's Comex sweeps. They said that the funds may have been waiting for a correction to buy but due to concerns of the market moving away from them decided to buy yesterday. 
“If participation from the macro hedge fund community has only just started to accelerate, this adds a new dynamic to the gold market.”
In normal financial and economic times, gold would be considered overvalued but we are far from that today and gold is experiencing a near perfect storm which could propel prices higher.
JP Morgan’s call for $2,500 gold by year end does not sound that outlandish given the fraught financial, economic and monetary conditions today.
A correction remains a real possibility but buying and holding bullion remains the best strategy in today’s volatile markets.
Cost averaging (dollar, euro, pound) is worth considering after the recent price move.


Today we saw all European bourses close lower as concerns on the major European banks certainly weigh in on investors.   The European banks are now trading below levels when the short selling ban was announced: (courtesy zero hedge)

European Banks Now At Or Below Short Selling Ban Levels

Tyler Durden's picture

When we first commented on our expectations about the "efficacy" of the short selling ban instituted last Thursday, we said: "There are those who say the upcoming short selling ban in all stocks in Italy and France, which according to CNBC will take place as soon as after the close today, or in one hour, will be beneficial to stocks. Then there are facts." And the facts are that one short week after the ban, European banks are already unchanged compared to the day of the ban and in France they are now negative! What next: selling is illegal or "Speculation" is a felony? We expect to find out soon...
Finally, an important currency cross is the Yen/USA dollar. Today it finished at 
76.51 but intraday it hit 75.95.  As the yen strengthens, the yen carry trade is unwound.
This is why massive amounts of dollars are needed in Europe as investors cash out of their dollar denominated trade as the yen losses must be staggering together with losses on USA equities.

(courtesy zero hedge):

Did Someone Just Leak QE3? USDJPY Plunges To Fresh All Time Low 75.95, Stocks Soar

Tyler Durden's picture

Yen surges, USDJPY plunges to a new record low of 75.97 (yes, YNoda is looking, looking, looking although better word is panicking, panicking, panicking), and the ES soared promptly. So... did someone finally leak it? Does the marketstill not get that it has to be lower the day of Jackson Hole for QE3 to work? Frontrunning any QE3 announcement merely makes it redundant. Bernanke needs stocks around 1000 on August 26, not higher. In the meantime, buy that Sony flat screen today. At this rate of Yen appreciation, the company may not exist in a few months.
USDJPY near all time record low;
And ES kneejerk:

I think it is time to say goodbye until Monday night.  I wish you all a grand weekend
All the best

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