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Silver Take Off: Are The Shorts Beginning to Cover?

Oct
14

Where's the note? - Redux. City Pension Deficits are now over $500 billion. Global currency wars are on! The world's reserve currency does a face plant. Uncle Sam's Mysterious [Gold] Hoard... and much more.

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¤ Yesterday in Gold and Silver

Gold rose about five dollars in Far East trading yesterday... and then was up about ten bucks at 11:00 a.m. in London... and was up about that amount until the London p.m. gold fix was in at precisely 3:00 p.m. local time... 10:00 a.m. in New York. Then gold shot up about fifteen bucks during the next hour. I would guess that it was a short covering rally, but I wouldn't bet the ranch on that. At 11:00 a.m. Eastern time, the buyer disappeared... and the gold price basically traded sideways for the rest of the New York session. Gold's high of the day was $1,375.30 spot, which occurred minutes before 11:00 a.m. Eastern time.

Silver was the star of the day, gaining twenty cents by 1:00 p.m. Hong Kong time yesterday afternoon. It basically traded sideways from that point until 9:15 a.m. in New York... and then away it went to the upside. The price action looked pretty orderly to me, so I doubt that there was much short covering... unless they were being awfully clever about it. Silver's high [$24.14 spot] came in electronic trading shortly after 4:00 p.m. in New York.

Here's the 3-day dollar chart. The world's reserve currency only declined about 20 basis points during the Wednesday trading day, so yesterday's price action in both precious metals certainly had nothing whatsoever to do with the dollar. But, as you already know, there are other forces at work in gold and silver at the moment.

The precious metals shares were off and running the moment that the equity markets opened for business yesterday. The HUI hit an early high shortly after 11:00 a.m. Eastern... and then basically traded sideways for the rest of the day. The HUI finished up 2.55%. Most of the precious metals stocks did better than that, as some of the large cap stocks didn't fully participate in yesterday's 'fun in the sun'... and that held the index back.

Wednesday's Delivery Report from the CME showed that 36 gold and zero silver contracts were posted for delivery tomorrow.

The GLD ETF reported another withdrawal yesterday. This time it was 68,385 ounces... the fifth withdrawal in a row since September 28th. However, the SLV ETF went the other direction... reporting an increase of 1,271,601 ounces of silver... the 10th addition in a row since September 9th.

The U.S. Mint reported more sales yesterday, as another 11,000 ounces of gold disappeared into their gold eagle sales program, along with another 125,000 silver eagles. Gold eagles month-to-date are 51,000 ounces... silver eagles 1,350,000. Are you getting your share, dear reader?

The Comex-approved depositories showed a decline of 178,665 ounces of silver in their Tuesday report... which is linked here.

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¤ Critical Reads

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Two Corrections to Previous Stories

In the news department today, I've got a couple of issues to deal with from my column on Wednesday... and also the column from Tuesday.

If you recall, I ran a story and link about how you could check to see if the bank you were making your mortgage payments to, actually had the original mortgage note... or not. I had two horrified readers contact me about this. They told me in no uncertain terms that the "Where's the Note?" link is part of an SEIU web-page. Apparently SEIU stands for "Service Employees International Union"... an organization that really freaked out these two readers. If you scroll down to the bottom of page one on that web page... the SEIU privacy policy is right there... along with their [and others] logo. So, if you haven't submitted your request through this link, I would advise you not to. If you really want to know where your mortgage note is, I suggest you contact your mortgage company directly and do it the old fashioned way. I apologize for this, as my intentions were nothing but honourable... as, I'm sure, was the person who sent me the link in the first place.

And from my Tuesday column... and I can't believe I made this mistake, because I really do know better, even though I live up here in Canada. Alan Mark Grayson, who is currently serving as a member of the U.S. House of Representatives from Florida's 8th congressional district is a Democrat... not a Republican. I apologize for my error to all my readers who I offended... and I thank the huge number of you that were kind enough to point out the error of my ways.

They're all out: 33 miners raised safely in Chile

My first real story of the day is one that we've all seen on TV over the last thirty-six hours... the miracle in Chile... and it really was a miracle. The yahoo.com headline reads "They're all out: 33 miners raised safely in Chile"... and the link is here.

US Cities Face Half a Trillion Dollars of Pension Deficits

The next story is courtesy of Australian reader Wesley Legrand. It's a story from London's Financial Times that was reprinted in a cnbc.com article on Tuesday. The headline reads "US Cities Face Half a Trillion Dollars of Pension Deficits". This is a very disturbing story... and the further you read, the more disturbing it becomes. It's a 2-minute read that I feel is worth your time... and the link is here.

Fears of global currency war rise

Here's Wesley's second contribution to today's column. It's another Financial Times story... but this one is posted over at cnn.com. The headline reads "Fears of global currency war rise". Now Thailand is getting into the act. That country is introducing a 15% withholding tax on foreign holdings of bonds, the latest in a string of attempts by emerging economies to curb destabilizing capital inflows. Imbedded in the story are several video clips about the possibility of a global currency war... and the link to all of that is here.

Economic Hallucinations

The next item for your reading pleasure is a GATA release. It's the latest market letter from Murray Pollitt of Pollitt & Co. in Toronto. Pollitt says that the "signs are all there for an earth-shaking currency collapse." This is a must read... and his commentary is headlined "Economic Hallucinations"... and the link is here.

Three Charts

Before I get into my gold-related stories, I have three graphs for you today. The first is from Wesley Legrand... and, as you can see by the credits on the graph itself, it's been around the block a time or two... and for very good reason. The graph title is self explanatory... and needs no further embellishment from me.

Another Australian provided the next two graphs... that being Nick Laird over at sharelynx.com. I was just about to e-mail him and ask for these, when they suddenly appeared in my in-box. Nick can obviously read my mind. The first is the PM Funds Index, which you've seen in this column on a regular basis. I'm delighted to see that it has finally broken above its old highs from back in 2008.

The second chart, which I also post regularly, is the Silver Seven Stock Index. It hasn't broken out to new highs yet, but it's certainly heading in the right direction in a hurry. The 'Silver Seven' include Coeur d'Alene Mines, First Majestic Silver, Hecla Mining, Pan American Silver, Industrias Peñoles, Silver Wheaton... and Silver Standard Resources. They are all equally weighted in this graph.

BIS collects a lot more gold, but from whom?

I only have two gold-related stories for you today. The first is a GATA release that Chris Powell has headlined "BIS collects a lot more gold, but from whom?". Imbedded in Chris Powell's preamble is a story that's posted over at the mineweb.com bearing the headline "BIS Taking in More Gold -- Who Are the Counterparties This Time?" As author Rhona O'Connell asks in the opening paragraph... "It's 10 a.m. Eastern time -- do you know where your gold is?" Chris Powell's preamble, plus the mineweb.com story itself, are both worth your time... and the link is here.

Uncle Sam’s Mysterious Hoard

My last golden offering of the day is a piece that's posted over at The Atlantic magazine. The headline reads "Uncle Sam’s Mysterious Hoard". The author asks... "In lean times, why is $300 billion worth of government treasure simply sitting in vaults?" In researching this article, the writer can't figure out why he can't get answers from the U.S. government about the U.S. gold reserves. GATA has been asking these questions for about eleven years with the same results. We're hopeful that our lawsuit against the Fed will yield some results. The article is a must read... and the photo is worth the trip all by itself... and the link is here.

Gold, Silver & What Bulls Dream About

And this just in from King World News at 5:17 a.m. this morning. It's commentary from James Turk that's headlined "Gold, Silver & What Bulls Dream About". This blog is a short read... and a must read... and the link is here.

¤ The Funnies

¤ The Wrap

Ordinary tyranny, oppression, excessive taxation... these bear lightly onthe happiness ofthe mass of the community, compared with fraudulent currencies and therobberies committed by depreciated paper.- Daniel Webster

The dollar did virtually nothing yesterday... and both silver and gold were on a tear.

But the moment that the market opened earlier today in the Far East, the dollar did another face plant... with the world's reserve currency down over 70 basis points as of 4:38 a.m. Eastern time. The precious metals were on the rise once again... with a big jump coming at the London open at 8:00 a.m. their time.

Gold is up $12.70 as I write these words... and silver is up a whopping 66 cents, which [without a doubt] is the biggest overnight move in the silver price in over thirty years. How would you like to be holding a short position in silver right now? This is wonderful to watch... and I'm hoping for the best... but always on the lookout for 'in your ear'.

Here's another chart courtesy of Nick Laird at sharelynx.com. It shows the percentage that both gold and silver prices are above their respective 200-day moving averages over the last 10-year period. Using the past as prologue, we could still run up a long way from here.

But, on the other hand, there's that huge short position in both metals that still has to be covered... and, at this point, there's little sign that serious short covering is going on. If the shorts capitulate... then lookout to the upside! This chart won't mean thing then... but we're not there yet.

It could be a wild and crazy day when trading begins in New York this morning.

I hope your Thursday goes well... and I'll see you here tomorrow.

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