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Lawrence Williams: Post-Cyprus Gold Price Defying Logic – Why?

29th Mar 2013, 4:20 pm by Ed Steer

¤ YESTERDAY IN GOLD & SILVER

The gold price traded sideways until 11:00 a.m. in London on their Thursday morning.  At that point a seller emerged...and by the 1:30 p.m. Eastern time Comex close, the price was down a bit more than ten bucks from Wednesday...and back under the $1,600 spot price mark once again.  After that, the price rose a couple of bucks off its low price tick of the day [$1,593.10 spot] which came at exactly 1:00 p.m. Eastern time.

Gold closed at $1,596.50 spot...down $8.90 on the day.  Net volume was around 129,000 contracts.

The chart pattern in silver was more or less the same.  The two smallish rally attempts during the New York session weren't allowed to get far...and the 12:35 p.m. Eastern time low tick was recorded by Kitco as $28.14 spot.

The rally off the low wasn't allowed to get far, either...and silver finished the Thursday trading session at $28.36 spot...down 33 cents from Wednesday's close.  Gross volume was around 42,500 contracts.

The dollar index opened at 83.18 in Far East trading yesterday...and then chopped lower until it hit its nadir just before lunch in New York.  From that low...82.84...the index rallied a bit into the close...finishing the Thursday session at 83.00 right on the button...and down 18 basis points from yesterday.

For the umpteenth day in a row, there was no correlation between the currency moves and the precious metal price action.

The gold stocks gapped down about a percent at the open...and then traded more or less sideways, before developing a slightly positive bias from there...cutting its losses on the day.  The HUI closed down 0.32%.

Despite the drop in price, there were quite a few green arrows amongst the silver stocks that I own/track.  However, none of the ones that make up Nick Laird'sIntraday Silver Sentiment Index were included in that list...and it closed down 1.57%.

(Click on image to enlarge)

The CME's Daily Delivery Report for 'Day 2' of the April delivery month in gold showed that 638 gold and zero silver contracts were posted for delivery on Tuesday, April 2nd.  The tallest hog at the trough in the short/issuer category was JPMorgan Chase with 129 contracts issued from its client account...and another 367 contracts from its in house [proprietary] trading account.  The only three long/stoppers of note were HSBC USA, Canada's Bank of Nova Scotia...and Barclays; with 244, 209 and 155 contracts respectively.  Besides JPM, there were a couple of dozen other entities listed as short/issuers yesterday...and the list is worth looking over.  The link to yesterday'sIssuers and Stoppers Report is here.

There were no reported changes in either GLD or SLV yesterday.

Joshua Gibbons, the Guru of the SLV Bar List, updated his website with in/out flows for the week ending Wednesday, March 27th..."Analysis of the 27 March 2013 bar list, and comparison to the previous week's list...3,382,697.3 oz. were added (all to Brinks London), 4,832,420.7 oz. were removed (all from Brinks London A), and no bars had a serial number change."  You can read the rest of the details here.

Over at Switzerland's Zürcher Kantonalbank for the period ending March 26th, they reported that their gold ETF declined by 13,706 troy ounces, but their silver ETF went in the opposite direction, gaining 48,001 troy ounces.

There was no sales report from the U.S. Mint.  I'm assuming that Good Friday is a holiday in the U.S...so the current sales figures from the mint should be the final ones for March.  For the month, they reported selling 62,000 ounces of gold eagles...11,000 one-ounce 24K gold buffaloes...and a whopping 3,356,500 silver eagles.  Based on these numbers, the silver/gold sales ratio for March was a hair under 46 to 1.

Year-to-date [first quarter] the silver/gold sales ratio computes out at almost 37 to 1.  That's based on 292,500 troy ounces of gold eagles...95,000 one-ounce 24K gold buffaloes...and an incredible 14,223,000 silver eagles.  I sure do hope that you're getting your share.

Over at the Comex-approved depositories on Wednesday, they didn't receive any silver...and shipped 601,216 troy ounces of the stuff out the door.  The link to that activity is here.

While on the subject of Comex silver, here's a 20 plus-year chart of Comex silver stocks that Nick Laird was kind enough to provide last night.

(Click on image to enlarge)

Here are some more neat photos that have been sent my way in the last couple of days that I thought worth sharing.

I'm back on my home computer after being out of town for five days. While I was away, I discovered that this weekend is Easter, so I'm making the assumption that today is a holiday.  That being the case, I'll treat today's column like it was Saturday, as I probably won't have one on that day.  According to Ted Butler, the Commitment of Traders Report will be posted on the CFTC's website today...holiday or not.  If that's the case, my commentary on it will have to wait until Tuesday's column.

 

¤ CRITICAL READS

Chicago PMI Tumbles As Production Plunges To September 2009 Levels

In what may be a stunning development, today the market may actually respond to an adverse piece of economic news by going lower. The news, in this case was the February Chicago PMI which tumbled from 56.8 to 52.4, the lowest since December and far below expectations of a 56.5 print - the biggest miss in 11 months.

This was driven by a plunge in New Orders which tumbled from 60.2 to 53.0, the most since May 2011, although virtually every other components was ugly: Production posted the weakest print since September 2009, Order backlogs had its ninth month of contraction in the last year, Inventories had their 4th contraction in the last six months, Supplier Deliveries were the longest in 15 months, and so on. Ironically, only Employment was relatively normal dropping a small 0.6 from 55.7 to 55.1.

This commentary was posted on the Zero Hedge website yesterday...and I thank Marshall Angeles for today's first story.

Read more...

Large Banks’ Legal Costs Headed for $100 Billion

Large global banks will likely pay more than $100 billion in legal fees when all is said and done to pay for their bad behavior in the mortgage-market collapse, the financial crisis, and the Libor rate scandal, The Wall Street Journal reports.

The big four U.S. banks — Citigroup, JPMorgan Chase, Bank of America and Wells Fargo – already have doled out $61.3 billion for financial-crisis and mortgage claims over the past three years, according to SNL Financial research firm.

U.S. banks will ultimately have to fork over another $24.7 billion for the repurchase of faulty mortgage loans, according to Compass Point Research & Trading.

And Libor and other settlements are expected to cost banks at least $14 billion.

This WSJ story was picked up and posted in the clear on themoneynews.com Internet site early yesterday morning...and it's the first offering of the day from West Virginia reader Elliot Simon.

Read more...

Banks Seek to Overturn Judge’s Ruling in Critical Mortgage Case

The nation’s largest banks, facing a torrent of lawsuits over shoddy mortgage securities, are pushing to overturn a series of tough rulings in an important case.

In a rare move, 15 banks — including Bank of America, Citigroup, JPMorgan Chase and UBS — filed a motion in Federal District Court in Manhattan late Tuesday night to throw out a series of decisions by  Judge Denise L. Cote, according to a copy of the court filing. In doing so, the financial institutions are aiming to broaden the amount of evidence they can gather in the hopes of quashing the lawsuit.

The rulings, the banks argue, are so “gravely prejudicial” that the firms had no choice, a step that was not “taken lightly.”

The case could have costly implications.

This short commentary was posted in The New York Times late in the afternoon on Wednesday...and I thank Phil Barlett for sending it.

Read more...

Jonathan Weil: Betray Your Bank Before Your Bank Betrays You

What’s a Slovenian with several hundred thousand euros in the bank supposed to do? Spread it out among at least a few different banks, that’s what. Or move the money out of the country, while it’s still possible.

Imagine what must be on the minds of any savvy depositors still left at Nova Kreditna Banka Maribor d.d., now 79 percent- owned by Slovenia’s government. It was one of only four lenders in October that failed the European Banking Authority’s latest capital-adequacy test, a ritual best known for how lax its standards are. One that flunked was Bank of Cyprus Pcl, where uninsured depositors face 40 percent losses as part of the country’s bailout terms. Another was Cyprus Popular Bank Pcl, also known as Laiki Bank, where uninsured deposits will fare far worse and the bank is being shut.

Cypriot banks’ customers were complacent after uninsured deposits went unscathed in Ireland, Greece, Spain and Portugal, the first euro-area countries to seek international rescues. Slovenians won’t have that excuse should their country be next.

This very interesting commentary by Jonathan was posted on theBloomberg website at 4:00 p.m. Mountain Daylight Time yesterday...and it's worth reading if you have the time.

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Max Keiser: Plunderball...The New Euro Banking Game

Never at a loss for words, Max and Stacey really takes off on this subject...and is an absolute must watch/listen...so I hope you have lots of time over the long weekend to do this.  This Russia Todayvideo was sent to me by Roy Stephens...and runs about 26 minutes.

Read more...

It Can Happen Here: The confiscation scheme planned for U.S. and U.K. depositors

Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland; and that the result will be to deliver clear title to the banks of depositor funds.

New Zealand has a similar directive indicating that this isn’t just an emergency measure for troubled Eurozone countries. New Zealand’s Voxy reported on March 19th:

The National Government [is] pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts...

Open Bank Resolution is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.

This same plan was proposed in Canada's new budget a week ago...and after the Easter long weekend, I'll be on the phone to my Member of Parliament, who I know very well.

This must read commentary by Ellen Brown was posted on thecounterpunch.org Internet site yesterday...and I thank Swiss reader B.G. for sending it along.

Read more...

Cyprus and the Unraveling of Fractional-Reserve Banking

The “Cyprus deal” as it has been widely referred to in the media may mark the next to last act in the slow motion collapse of fractional-reserve banking that began with the implosion of the savings-and-loan industry in the U.S. in the late 1980s.

This trend continued with the currency crises in Russia, Mexico, East Asia, and Argentina in the 1990s in which fractional-reserve banking played a decisive role. The unraveling of fractional-reserve banking became visible even to the average depositor during the financial meltdown of 2008 that ignited bank runs on some of the largest and most venerable financial institutions in the world. The final collapse was only averted by the multi-trillion dollar bailout of U.S. and foreign banks by the Federal Reserve.

Even more than the unprecedented financial crisis of 2008, however, recent events in Cyprus may have struck the mortal blow to fractional-reserve banking. For fractional-reserve banking can only exist for as long as the depositors have complete confidence that regardless of the financial woes that befall the bank entrusted with their “deposits,” they will always be able to withdraw them on demand at par in currency, the ultimate cash of any banking system.

This absolute must read commentary was posted on the mises.orgInternet site yesterday...and I thank Elliot Simon for his second article in today's column.

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Martin Hutchinson: Not a Decent Banker Among Them

I wrote some months ago about the problems involved in going back to a world in which government bonds are no longer a reliable store of value, and suggested that such a change would reverse 350 years of financial history, taking us back to the time before the establishment of the Bank of England in 1694. A world in which neither government bonds nor banks are to be trusted takes us back about 400 years further. After all, Samuel Pepys only occasionally buried his money in the back garden; most of the time he entrusted it to a reliable goldsmith, the precursors to the London merchant banks. The goldsmith-bankers were new in Restoration England, but as Edward, Earl of Clarendon wrote in his memoirs around 1670, before their time, the scriveners had been available for "money business." A world without banks takes us back before the scriveners, before the first Italian banks (Monti dei Paschi di Siena, 1472) and even before the Lombard moneylenders of the fourteenth century.

We thus live in a world in which neither the managers of J.P. Morgan nor the financial wizards of the European Union have the slightest awareness of the basic needs of a sound financial system.

This rather longish essay was posted on the prudentbear.comInternet site on Monday...and I thank reader U.D. for bringing it to our attention.

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BRICS Development Bank would shift the tectonic plates of geopolitics and geo-economics’

The BRICS Development Bank is the beginning of the end of the existing monetary management system, Asia Times correspondent Pepe Escobar told RT.

RT: There’s no doubt about it, these countries that form the BRICS, they haven’t got a lot in common have they? They’ve all got different styles of government indeed some of them are economic rivals. Are they really a group to be taken seriously?

Pepe Escobar: From now on yes, let’s say until this summit in Durban, there was a lot of political talk of course and the BRICS are basically an economic group in the making. Now it’s different, now they have clear sound, actual policies to be implemented.

This alternative to the World Bank and the IMF is absolutely essential, this is the beginning of the end of the Bretton Woods system and is to be supported by the next BRICS, the MIST, the Mexico, Indonesia, South Korea and Turkey and the next MISTS as well.

This Russia Today interview with the Asia Times' Pepe Escobar is amust read if you're a serious student of the "New Great Game"...and I thank Roy Stephens for sending it earlier this week

Read more...

Jeff Clark: Preparing for Inflationary Times

"All this money printing, massive debt, and reckless deficit spending – and we have 2% inflation? I'm beginning to believe that either the deflationists are right, or the Fed's interventions are working." – Anonymous Casey Research reader

The CPI, in our view, does not accurately measure inflation, which accounts for some of the discrepancy our reader is pointing out. However, the proper definition of inflation is "an increase in the quantity of money," which we've had in spades. We've not experienced the concomitant increase in prices, which is what we're addressing in this article.

It's logical to assume that when you create more of something, you dilute the value of what's already in existence. That's exactly what has happened to the US dollar since the 2008 financial crisis hit. Economics 101 says this should lead to higher inflation – yet official Consumer Price Index (CPI) levels remain benign.

This essay by Casey Research's own Jeff Clark was posted on the CRwebsite yesterday afternoon Eastern time...and you can put that on your reading pile for this weekend as well.

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Spain Says 2012 Deficit Is Bigger Than First Estimated

The budget shortfall excluding aid to the banking sector was 6.98 percent of gross domestic product last year, more than the 6.74 percent predicted on Feb. 28, Deputy Budget Minister Marta Fernandez Curras told reporters in Madrid today. That compares with 8.96 percent in 2011...

These are the 'official' figures...and it's an absolute certainty that the real numbers are materially worse than that...especially when you add in the "aid to the banking sector"...as debt it debt.

I borrowed this Bloomberg Businessweek story from yesterday's edition of the King Report.

Read more...

Slovenia faces contagion from Cyprus as banking crisis deepens

Slovenia’s borrowing costs have rocketed over recent days as it grapples with a festering financial crisis, becoming the first victim of contagion from Cyprus.

“Banks are under severe distress,” said International Monetary Fund in its annual health check on the country. Non-performing loans of the Slovenia’s three largest banks reached 20.5pc last year, with a third of all corporate loans turning bad.

Yields on two-year debt in the Alpine state have tripled over the past week, jumping from 1.2pc to 4.26pc before falling back slightly on Thursday. Ten-year yields have reached a post-EMU high of 6.25pc.

“The country has lost competitiveness since joining the euro and it’s lead to slow economic collapse. Markets have been very complacent, but it has been clear for a long time that the banks need recapitalisation, and it is not easy to raise money in this climate,” said Lars Christensen from Danske Bank.

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