Saturday, January 21, 2012

Raid on gold and silver rebuffed/silver rises above $32.00 in access market/No deal on Private Greek debt

Good morning Ladies and Gentlemen:

Before commencing we finally witnessed 3 banks enter the banking morgue.  The FDIC holiday for the boys is now over.

Here are the latest entrants;

1. American Eagle Savings Bank of Boothwyn PA
2. First State Bank of Stockbridge GA
3. Central Florida State Bank, Bellview FL.

may they rest in peace.

end

I wrote to the CFTC last night suggesting to them that a probable raid was forthcoming on Friday.  You could tell from the weak equity shares traded on Thursday despite gold bouncing off the $1650 level 4 times.  The high OI is causing concern to the bankers as they are witnessing a large number of option holders standing for delivery in both gold and silver.

Wait to you see what happened inside the comex vaults.

Gold finished the comex session at $1663.70 for a gain of $9.60 on the day even though the bankers decided that another raid was in order.  They drove the price of gold to around the $1645.00 level and immediately it started to rise above the $1650 level.  Another push down had no effect and finally gold zoomed to finish the session at $1663.70.  Silver however was the bright star refusing to buckle at any cost.
It finished the comex session at $31.65

In the access market, gold and silver continued its northern trajectory.  Here are the final closing access market prices:

gold:  $1667.00
silver: $32.20

Let us head over to the comex and assess trading, position limits, inventory levels and amounts of metal standing.  Friday was an extremely busy day for the boys.

The total gold comex OI rose again by 2930 contracts and again this was fodder for the bankers.
Probably they hit gold due to silver's strong advance of late.  The raid had no effect on silver as this poor man's gold showed no interest in the bankers antics.  The total OI for gold rests this weekend at 441,320 contracts.  The front options expiry month of January again mysteriously advanced 37 contracts today despite zero delivery notices yesterday.  We thus gained another 3700 oz of gold oz standing.  The next big delivery month is February which is a little over a week to go before first day notice, on Tuesday Jan 31.2012.  Here the OI fell from 160,113 to 156,621 which is a little light on the rollovers.  The estimated volume at the gold comex on Friday was quite tame at 152,745 if you consider some of the rolls.  The confirmed volume on Thursday was a little better at 166,269 contracts.

The total silver comex OI again saw its OI fall from 102,870 to 102,055.  The bankers are just refusing to supply any non backed paper. With very little non backed silver paper supply, it was easy for silver to rise  above $32.00 yesterday.
The front options expiry month of January saw its OI fall from 175 to 152  for a loss of 23 contracts.  We had exactly 23 delivery notices yesterday so neither gained nor lost any silver oz standing and thus no cash settlements either.  The next big delivery month is March and here the OI fell by close to 2000 contracts from 53,240 to 51,351 contracts.  It looks like the Sprott purchase of 10 million oz of silver (300million dollars) is scaring the dickens out of our bankers.  The estimated volume at the silver comex on Friday came in at 45,753 which is a little higher than what we have been witnessing lately.  The confirmed volume on Thursday was very weak at 35,826.


Inventory Movements and Delivery Notices for Gold: Jan 21 2012:




Gold
Ounces
Withdrawals from Dealers Inventory in oz
100 ,(Brinks)
Withdrawals from Customer Inventory in oz
32,408 (HSBC, Scotia,Manfra)
Deposits to the Dealer Inventory in oz

nil
Deposits to the Customer Inventory, in oz
32,015 (HSBC)
No of oz served (contracts) today
11 (1100)
No of oz to be served (notices)
44 (4400)
Total monthly oz gold served (contracts) so far this month
1092  (109,200)
Total accumulative withdrawal of gold from the Dealers inventory this month
4598
Total accumulative withdrawal of gold from the Customer inventory this month

227,568


We had considerable activity at the gold comex on Friday.
However no gold entered the dealer as a deposit.  There was a tiny 100 oz dealer withdrawal
at Brinks.

We had the following customer deposit:

1. Into HSBC  32,015 oz

We had the following customer withdrawal:

1.  The HSBC deposit arrived from a withdrawal of 32,015 oz from Scotia.
2.   We had another 136 oz withdrawal from HSBC
3.   Finally we had a 257 oz withdrawal from Manfra

total withdrawal  32,408 oz.
we had no adjustments.

Thus the total registered gold rests tonight at 2.461 million oz of gold or 76.54 tonnes

The CME notified us that we had 11 delivery notices filed on Friday for delivery on Monday  (1100 oz)
The total number of gold notices filed so far this month total 1092 for 109200 oz of gold.
To obtain what is left to be served, I take the OI standing (53) and subtract out Friday deliveries (11)
which leave us with 44 notices or 4400 oz left to be served upon.

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

109,200 oz (served)  +   4400 (oz to be served)  =   113,600 oz or 3.533 tonnes.

If we had the delivery month of December to the two non delivery months of January and November we have a total of  74.213 tonnes of gold against a dealer inventory of 76.54 tonnes or 96.96% of available dealer gold.

And now for silver 

 the chart: January 21 2012:

Month of January now commences:


Silver
Ounces
Withdrawals from Dealers Inventory30,568 (Scotia)
Withdrawals fromCustomer Inventory277,889( Scotia Brinks, Delaware)
Deposits to theDealer Inventory600,159 (Brinks)
Deposits to the Customer Inventory1,241,603 (HSBC,Scotia))
No of oz served (contracts)114 (570,000)
No of oz to be served (notices)38  (190,000)
Total monthly oz silver served (contracts)938  (4,690,000)
Total accumulative withdrawal of silver from the Dealersinventory this month298,683
Total accumulative withdrawal of silver from the Customer inventory this month


 3,307,910
we had considerable activity inside the silver comex today.

The dealer Brinks received 600,159 oz of silver.
The dealer Scotia withdrew 30,568 oz of silver.

Here are the customer deposits:

1.  Into HSBC:  609,938 oz
2. Into Scotia:  631,665 oz

total customer deposit:  1,241,603 oz.

We had the following customer withdrawal:

1. Out of Brinks:  149,567 oz
2. Out of Delaware:  12,029 oz
3. Out of Scotia:  116,293 oz

total withdrawal:  277,880 oz
we had one adjustment:

37,042 oz was adjusted out of a customer and into a dealer.
The total registered silver rests this weekend at 37.400 million oz
The total of all silver rests at 127,145 million oz.

The CME notified us that we had a huge 114 notices filed on Friday for 570,000 oz
The total number of notices filed so far this month total 938 for 4,690,000 oz.
To obtain what is left to be served, I take the OI standing for January (152) and subtract out Friday delivery notices (114) which leaves us with 38 notices or 190,000 oz.

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

4,690,000 oz (already served) +  190,000 (oz to be served ) =  4,880,000 oz
exactly the same as Thursday.  We neither gained nor lost any silver oz standing.

end

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.



Jan 21. 2012:


Total Gold in Trust

Tonnes:1,255.67

Ounces:40,371,055.31

Value US$:66,715,704,123.97





JAN 19.2012



TOTAL GOLD IN TRUST

Tonnes:1,255.67

Ounces:40,371,056.92

Value US$:66,797,175,408.39








JAN 18.2012



TOTAL GOLD IN TRUST

Tonnes:1,255.67

Ounces:40,371,056.92

Value US$:66,474,936,984.83








we neither gained nor lost any gold inventory at the GLD.
Considering the massive volatility in gold, this is rather strange that not a single oz entered the vaults.





And now for silver Jan 21 2012: 

Ounces of Silver in Trust305,970,641.100
Tonnes of Silver in Trust Tonnes of Silver in Trust9,516.75


Jan 19.2012



Ounces of Silver in Trust305,970,641.100
Tonnes of Silver in TrustTonnes of Silver in Trust9,516.75









we neither gained nor lost any silver today in the SLV.
Again very strange with the huge activity in the price of silver this week.  No additions whatsoever.


end.




And now for our premiums to NAV for the funds I follow:



1. Central Fund of Canada: traded to a positive 6.5 percent to NAV in usa funds and a positive 6.3% to NAV for Cdn funds. ( Jan 21 2012.).
2. Sprott silver fund (PSLV): Premium to NAV fell  to  8.86.% to NAV  Jan 21 2012:
3. Sprott gold fund (PHYS): premium to NAV fell  to a 4.86% positive to NAV Jan 21. 2012). 



the fall in the Sprott fund is due to the dilution of existing inventory with new silver inventory. The premium will resume in a month if Sprott gets his silver.

end


The COT report was released last night. Let us see how position limits will shape the paper price of gold and silver:

Gold COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
167,373
31,344
34,061
172,691
345,667
374,125
411,072
Change from Prior Reporting Period
1,111
-2,158
707
11,742
18,144
13,560
16,693
Traders
163
66
76
52
50
251
161


Small Speculators




Long
Short
Open Interest



58,713
21,766
432,838



1,355
-1,778
14,915



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, January 17, 2012



Those large specs that have been long in gold continued to pile into gold to the tune of 1,111 contracts.

Those large specs that have been short in gold thought the environment was a little steamy so they covered a good chunk of gold namely 2158 contracts.

Our commercials;

Those commercials that have been long in gold and are close to the physical scene added a monstrous 11,742 contracts to their long side.

And those commercials that have been perennially short in gold added a humongous
18,144 contracts to their short side. No wonder we had the raid on gold these past 3 days.

Our small specs:

Those small specs that have been long in gold added another 1355 longs to their credit and they are happy campers tonight.

Those small specs that have been short in gold covered a relatively high 1778 contracts from their short side:

Conclusion: the buildup by the bankers of their shorts surely precipitated the raid these past several days.  The raid failed.

It looks like the bankers are going to retreat to higher ground (higher price) and attack again.

end...

Silver COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
26,209
12,816
19,228
39,029
59,411
84,466
91,455
1
-2,321
372
70
1,390
443
-559
Traders
62
32
41
36
42
120
99

Small Speculators




Long
Short
Open Interest



19,202
12,213
103,668



-1,120
-118
-677



non reportable positions
Change from the previous reporting period

COT Silver Report - Positions as of
Tuesday, January 17, 2012

I would like of you to compare the COT report in silver to gold.
There is no question that the bankers are refusing to supply the needed non backed silver paper.

Our large specs that have been long for eternity added a measly one contract to their longs.
Our large specs that have been short in silver certainly did not like the layout of the land and they covered a rather large 2,321 contracts.

Our commercials;

Those commercials that are close to the physical scene and generally long in silver added a very tiny 70 contracts to that long side.

Those commercials that have been perennially short in silver and these guys are subject to class action lawsuits and a CFTC probe:  added a smallish 1,390 contracts to their short side.

Our small specs:

Those small specs that have been long in silver  pitched 1120 contracts from their long side and tonight they are not happy campers.  They guessed wrong.

Those small specs that have been short in silver covered a tiny 118 contracts from their short side:

Conclusion: the bankers are leaving Dodge!

end.

As everyone is aware, the private holders of Greek bonds held a meeting and early in the Friday, European session. It was rumoured that they were close to a deal.  However by the end of the day no deal was announced.  Here is the Bloomberg story that caused excitement on bourses throughout the world:

(courtesy Bloomberg)

Greece Moves Closer to Debt-Swap Accord With Private Investors


By Marcus Bensasson and Tom Stoukas - Jan 20, 2012 2:07 PM ET


Greece and its private creditors are closing in on a debt swap accord that’s crucial to cutting the country’s borrowings and allowing it to receive a second round of international aid.
“There’s been significant progress,” Hans Humes, president of Greylock Capital Management and a member of the creditor committee negotiating the deal with the government, said in a Bloomberg Television interview today. “There’s broad agreement about the coupons and structural elements.”
European officials and the nation’s private bondholders agreed in October to implement a 50 percent cut in the face value of just more than 200 billion euros ($259 billion) of Greek debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing Greece’s borrowings to 120 percent of gross domestic product by 2020. An accord with bondholders is key to a second financing package for the cash- strapped country, which faces a 14.5 billion-euro bond payment on March 20.
Talks on the swap were set to resume at 7:30 p.m. in Athens, Greek Finance Minister Evangelos Venizelos told reporters after meeting with creditors and Prime Minister Lucas Papademos today.
Charles Dallara, managing director of the Institute of International Finance, a Washington-based lobby group representing creditors in the talks, said he may have something to say on the matter later today. He declined to elaborate. The talks broke in Athens earlier today so Greek officials could consult with European Union representatives, Venizelos said.

90 Percent Participation

The parties are nearing an agreement under which old bonds would be swapped for new securities with coupons averaging between 4 percent and 4.5 percent, said a person with knowledge of the discussions. Unresolved issues remain, such as whether private investors would be treated differently from official creditors in the event of a later default, said the person, who declined to be identified because the talks are confidential. The objective is to reach a deal before Jan. 23, the person said.
The two sides, which broke off negotiations on Jan. 13 before resuming them two days ago, have struggled to reach an accord on the coupon and maturity of the new bonds, which would determine losses for investors.
Humes said he’s “cautiously optimistic” the talks will lead to an accord. “If the IIF shake hands with the other side of the table, we will have a 90 percent or higher acceptance rate,” Humes estimated.

Voluntary Swap

Marathon Asset Management LP CEO Bruce Richards estimated in a Jan. 17 interview that private creditors were likely to get cash and securities with a market value of about 32 cents per euro ofgovernment bonds in the debt accord.
Marathon, which has $10 billion under management, is on the committee of 32 private creditors formed in November to negotiate with Greece, the International Monetary Fund and the EU. It’s not on the smaller steering committee directly involved in negotiations.
Questions remain how the two sides can craft a voluntary deal that will provide the debt relief the Greek government requires while attracting enough participation from bondholders. The government may scrap its earlier threat to pass a law compelling full participation from private creditors, said the person familiar with the talks.
Venizelos said before yesterday’s round of talks that for the final deal to lead to a sustainable level of debt for the country there must be a 100 percent participation rate.

Troika Talks

“Critical negotiations are taking place with representatives of the private sector on how they will participate as radically and bravely as possible, but also voluntarily,” Venizelos told lawmakers in Athens, in comments televised live. “It must be voluntary and participation must be 100 percent,” he said.
Hedge funds holding Greek bonds may resist the deal, seeking greater profit by getting paid in full, either by the Greek government or by triggering payouts from credit-default swaps. Winning support from banks seeking to limit their losses may be easier than including hedge funds and other speculators who bought securities at distressed levels.
Vega Asset Management LLC resigned from the committee of Greek creditors negotiating the debt swap last month because the Madrid-based hedge fund refused to accept a net present value loss exceeding 50 percent, according to a Dec. 7 e-mail sent to other panel members, which was obtained by Bloomberg News.
Greek officials also met today with the so-called troika mission, which is comprised of European Commission, European Central Bank and IMF representatives, on the new 130 billion- euro financing accord for the country.

‘Interdependent’

“Reaching an agreement on the new loans and finishing a debt swap are interdependent,” Venizelos told lawmakers in Athens yesterday.
The creditors’ steering committee negotiating the debt swap includes representatives from banks and insurers with the largest holdings of Greek government bonds, including National Bank of Greece SA (ETE)BNP Paribas (BNP) SA, Commerzbank AG (CBK)Deutsche Bank AG (DBK)Intesa Sanpaolo SpA (ISP)ING Groep NV (INGA)Allianz SE (ALV) and Axa SA. (CS)
Financial firms on the IIF’s private-creditor investor committee, a larger group of 32 membersthat includes the smaller steering committee, hold more than 47 billion euros in Greek sovereign debt, according to data compiled by Bloomberg from company reports.
To contact the reporters on this story: Marcus Bensasson in Athens atmbensasson@bloomberg.net Tom Stoukas in Athens at astoukas@bloomberg.net
To contact the editors responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net; Jerrold Colten at jcolten@bloomberg.net Craig Stirling at cstirling1@bloomberg.net


end

Today, the IMF gets into the act, warning that more austerity is needed.

Good grief!!:

courtesy Bloomberg


Lagarde Joins Warning on Austerity as Leaders Head to Davos

by Shamim Adam - Jan 20, 2012 1:01 AM ET

International Monetary Fund Managing Director Christine Lagardejoined world financial and trade organization chiefs in warning policy makers gathering in Davos, Switzerland next week against fiscal cuts that jeopardize growth.
“The world faces significant and urgent challenges that weigh heavily on prospects for future growth,” Lagarde and members of the Global Issues Group of the World Economic Forum said in a statement. “We worry about decelerating global growth and rising uncertainty, high unemployment” and a potential shift to protectionist policies, they said.
While governments need to stem contagion in Europe and restore confidence in financial institutions to end the sovereign-debt crisis and spur expansion, they should manage fiscal consolidation to promote rather than reduce growth prospects, the group said. Its members also include World Bank President Robert Zoellick, World Trade Organization Director- General Pascal Lamy and the heads of eight other multilateral and regional institutions.
Policy makers and business leaders will meet at the World Economic Forum starting on Jan. 25 after the World Bank cut its global growth forecast this month by the most in three years, saying that a recession in the euro region threatens to exacerbate a slowdown in emerging markets. The IMF proposed this week to raise its lending capacity by as much as $500 billion to insulate the world against any worsening of Europe’s debt crisis.

ECB’s Role

Lagarde and the heads of the institutions highlighted an expanded role of the European Central Bank as one option for helping resolve the region’s crisis.
“Different options are being considered for stemming contagion in the euro area,” the Global Issues Group said. “They have involved greater recourse to the European Central Bank’s balance sheet and require a strengthening of the European Financial Stability Fund. Governance reforms are needed to offset the risk of moral hazard involved in short-term support packages and to ensure longer-term fiscal discipline.”
The ECB’s decision to offer banks unlimited three-year loans and the central bank’s purchase of sovereign bonds helped balloon its balance sheet to a record 2.73 trillion euros ($3.5 trillion) in December.
In the short term, confidence in financial institutions can be restored by recapitalizing banks quickly where necessary and ensuring that deleveraging by lenders doesn’t impair trade and project finance, the Global Issues Group said.

Banks Hoarding

Banks are hoarding the European Central Bank’s record 489 billion-euro injection into the banking system, thwarting attempts by policy makers to avert a credit crunch in the region. Almost all of the money loaned to 523 euro-area lenders last month wound up back on deposit at the Frankfurt-based central bank instead of pouring into the financial system, according to estimates by Barclays Capital based on ECB data.
Governments are urging European banks to keep lending to companies and individuals while requiring them to raise an additional 114.7 billion euros of core capital by June to weather a deepening sovereign-debt crisis. Instead of raising equity, most lenders across Europe have vowed to meet capital rules by trimming at least 950 billion euros from their balance sheets over the next two years, either by selling assets or not renewing credit lines, according to data compiled by Bloomberg.

Ensure Funding

Continuing the ECB’s measures to secure bank funding and liquidity will help stem financial contagion and stabilize the region’s fiscal frameworks, while enhancing the European Financial Stability Facility and European Stability Mechanism will “ensure governments can fund at sustainable rates,” the Global Issues Group said.
European governments have redoubled efforts to set up the 500 billion-euro European Stability Mechanism by July, a year ahead of schedule, after a credit rating downgrade raised concerns over the strength of the temporary European Financial Stability Facility aid fund created at the outset of the crisis.
The world economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, according to the World Bank. The IMF will cut its global growth forecast for 2012 to 3.3 percent from 4 percent when it publishes its World Economic Outlook report next week, the Daily Telegraph said yesterday, citing a leaked draft of the publication.
Leaders of the Group of 20 should intensify efforts to develop a “more comprehensive action plan” for economic expansion and job creation ahead of a planned summit in June in Mexico, the Global Issues Group said.

Political Energy

“We call on leaders to devote the necessary political energy to deliver concrete actions to exit the crisis and boost growth,” they said.
The other members of the group are Mark Carney, chairman of the Financial Stability Board; World Health Organization Director-General Margaret Chan; Angel Gurria, Secretary-General at the Organization for Economic Cooperation and Development; African Development Bank President Donald Kaberuka; Asian Development Bank President Haruhiko Kuroda; Inter-American Development Bank President Luis Alberto Moreno; Josette Sheeran, executive director of the United Nations World Food Programme and International Labour Organization Director-General Juan Somavia.
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


end

At 4 o'clock we got news of record Euro shorts.  You can visualize the crooked CME raising the margin limits on those shorts sometimes next week, which will cause massive short covering and a huge rise in the Euro and thus gold:

(courtesy zero hedge)


EUR Shorts Hit New Record

Tyler Durden's picture




Another week, another record bet on EUR currency collapse: this even in a countertrend week, when the EURUSD actually soared by over 300 pips. In other words, not only did shorts notcover, as some have suggested, they doubled down on losing positions, in the process bringing total net non-commercial spec contracts to -160K from -155K the week prior. As a result, should the EUR snap over the psychological barrier of 1.300 which it almost did in the overnight session by 15 or so pips, or should the CME hike EUR margins, we may promptly see a move in the pair comparable to the 300 pip surge experienced when the expanded QE1 was announced on March 18, 2009.

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