Gold & Silver Digest: 7/22/13

Adam Taggart
By Adam Taggart on Mon, Jul 22, 2013 - 6:06pm

The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.

If you have articles to submit for the next digest, please email them to me by clicking here.

7/22/13 6:00 PM EST US close metals price quotes from Finviz

Reuters: Gold surges above $1,300-an-ounce level, bears seek cover

Gold surged 3 percent and hit a one-month high on Monday, vaulting back over a technical threshold at $1,300 an ounce as speculators fearing a reversal of the recent downward price trend rushed to buy back bearish bets.

It was the gold's heftiest one-day gain in 13 months and its three-day rally is the biggest in almost two years. Also contributing was heavy short covering as futures investors anticipating the start of delivery period on August contracts rolled positions from August to December. The first day for delivery notices is July 31. 

CNBC: Gold regains some luster, has best day of the year

Gold prices jumped as the dollar slipped, giving the precious metal its best day of the year Monday and setting up for further gains.

U.S. gold futures for August delivery rose 3.3 percent, to a four-week high $1,336 a troy ounce, its best one-day gain since June 2012. The dollar index was down about 0.5 percent in afternoon trading, at 82.19.

Jesse's Café Américain: Developing Gold Bottom: A Closer Look At a Short Term Excess of Power

Here is a closer look at the gold bottom that everyone and their brother was rushing to call last week, so they could claim prescience. 

As a reminder this is an option expiration week for the precious metals on the COMEX, and next week begins the August delivery period.

I have also included an update to the weekly silver chart, for inquiring minds who wish to know.   Silver is following gold on this upsurge.  A confirmation of the rally by silver is important.  If silver confirms the breakout, it will most likely gather significant momentum as its volatility engages the short squeeze.  But the physical silver supply situation is not as compelling as gold has been, although the seeds were sown when the pricing started to curtail mining activity more significantly.

Seeking Alpha: COMEX Gold Inventories Plummet: Shorts May Be Forced To Cover Fast

We have covered the rapidly declining COMEX gold inventories in previous articles, and the story seems to be getting old, but COMEX gold continues to drop with registered gold inventories hitting their lowest levels ever. Additionally, total COMEX gold has now dropped under 7 million total ounces or by almost 40% since the beginning of the year (we started 2013 with around 11 million total ounces).

This is something that should be very relevant to investors who own physical gold and the gold ETFs (GLD, PHYS, and CEF) because any abnormal inventory declines may signify extraordinary events behind the scenes that would ultimately affect the gold price.

FinanceAndEconomics.org: Gold versus the money supply

In a recent article I introduced the concept of allowing for the increased quantity of aboveground gold and the expansion of the quantity of dollar currency over time when trying to value gold. The purpose of this article is to explain why such an obvious adjustment is rarely contemplated and why it should be applied.

The reason no one adjusts the dollar quantity is we want to think of the dollar as having a constant value when we buy assets or goods. We describe prices of goods as rising or falling, and never the currency falling or rising. When we construct an index of house prices or stocks we do not take into account the debasement of the currency.

Forbes: China Working Quietly To Buy Up Gold

The Fed’s preferred measures of inflation are so low they’re in the Fed’s panic zone. What gives?

“There’s an ideal playbook, and it would look something like this,” James Rickards, author of the New York Times bestseller Currency Wars, explained. “You’d have higher inflation than we have today, but not super high. It might be in the 3-4% range. GDP of maybe 5%, which is pretty high, and then that would bring down the debt-to-GDP ratio so the United States doesn’t look like Greece.”

ZeroHedge: Ahead Of Tomorrow's Hearing On Goldman And JPM's Commodity Cartel

Back in June 2011 we first reported how "Goldman, JP Morgan Have Now Become A Commodity Cartel As They Slowly Recreate De Beers' Diamond Monopoly [20]" in an article that explained, with great detail, how Goldman et al engage in artificial commodity traffic bottlenecking (thanks to owning all the key choke points in the commodity logistics chain) in order to generate higher end prices, rental income and numerous additional top and bottom-line externalities and have become the defacto commodity warehouse monopolists. Specifically, we compared this activity to similar cartelling practices used by other vertically integrated commodity cartels such as De Beers: "While the obvious purpose of "warehousing" is nothing short of artificially bottlenecking primary supply, these same warehouses have no problem with acquiring all the product created by primary producers in real time, and not releasing it into general circulation: once again, a tactic used by De Beers for decades to keep the price of diamonds artificially high."

Over the weekend, with a 25 month delay, the NYT "discovered [21]" just this, reporting that the abovementioned practice was nothing but "pure gold" to the banks. It sure is, and will continue to be. And while we are happy that the mainstream media finally woke up to this practice which had been known to our readers for over two years, the question is why now? The answer is simple - tomorrow, July 23, the Senate Committee on Banking will hold a hearing titled "Should Banks Control Power Plants, Warehouses, And Oil Refiners [22]."

Mining.com: Shanghai ETFs flop, premiums plummet: China simply cannot absorb wave of gold selling

The emergence of the gold ETF industry has been a big factor in gold's uninterrupted 12-year bull run, because ETFs make it so easy to invest in the yellow metal.

When the first gold-backed ETF was introduced in Australia in 2003, the price of gold was around $320 an ounce.

This week gold-backed ETF holdings fell to the lowest levels since May 2010 – a staggering 653 tonnes worth of redemptions since December 2012.

King World News: Gold Headed To Old High, But Gains In Silver Will Be Historic

With the price of gold and silver soaring, today John Embry told King World News there is going to be a continued massive surge in the gold price, but the gains in silver will be “historic.”  Embry spoke at length about the gold and silver markets, the Fed and the mining shares.  Below is what Embry had to say in this powerful interview.

Embry:  “I’m focused on the better tone in the gold and silver markets.  It’s been a long struggle, but with all of the information that’s come out recently regarding how tight the physical market is and the fact that the paper gold market really is one of the greatest Ponzi schemes of all-time, I think we could finally be on the cusp of a huge move in gold....

NY Daily News:  U.S Explorers raise the bar — 1,574 silver ones — in WW II shipwreck 

Odyssey Marine Exploration just finished a record-setting recovery effort in the North Atlantic, pulling 1,574 silver ingots from the wreck of merchant ship SS Gairsoppa three miles below the choppy seas. The total value is expected to rise more than $35 million.

USA Today: Gold rush trash is Information Age treasure

SACRAMENTO, Calif. (AP) — Across the West, early miners digging for gold, silver and copper had no idea that one day something else very valuable would be buried in the piles of dirt and rocks they tossed aside.

There's a rush in the U.S. to find key components of cellphones, televisions, weapons systems, wind turbines, MRI machines and the regenerative brakes in hybrid cars, and old mine tailings piles just might be the answer. They may contain a group of versatile minerals the periodic table called rare earth elements.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

3 Comments

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2387
Chinese ETF Demand..

Concerning the article about China ETF "demand".. what a crock!  Why buy with counter-party risk when you can just buy physical.. it's not like there is a lot of money in China "trapped" in tax-deferred IRA-like vehicles, etc., that need a way to invest in Gold.   Total BS... Sprott wrote about this a few days ago;

http://sprottgroup.com/thoughts/articles/the-shanghai-gold-surprise/

Interestingly, China’s demand for physical gold does not seem to be benefitting the growth of gold ETF products within the country. Bloomberg recently reported that China’s first two exchange-traded funds backed by bullion both had disappointing debuts, with Huaan Asset Management Co. reportedly raising only $195 million out of an expected $400 million at launch.3Although the press has naturally concluded that this news indicates waning gold demand in China, we can’t help but think it shows that China’s gold interest is primarily focused on the physical metal, as opposed to financial products that trade on exchange. Certainly if the time ever comes where the physical gold market sets price discovery for the gold price (as opposed to the futures market) it seems highly likely that the first place that will happen now is within Shanghai itself.

As for the events of today... what we are seeing is a bank run on the physical Gold system that is starting to overwhelm the paper price negotiation.. something many of us have been anticipating for a while.  Don't expect this to go up in a straight line..but it is pretty clear that something is going to break.  Bill Holter from Miles-Franklin has been an astute observer of the goings-on of late;

http://blog.milesfranklin.com/i-really-dont-understand-gold

Regardless of what Ben Bernocchio says or wants people to think, we are (and have been for more than 3 months) witnessing a bank run.  This “bank run” is not on any one single bank, it is on the system itself.  Inventories being drawn down, custodians refusing to deliver and even sovereigns making claim to their gold shows that a choice has been made.  The negative curve (backwardation) is proof positive that investors are voting with their feet and saying, “I want my gold, real gold, and I want it now…I will not accept any substitutes.”

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2387
Jim Sinclair on Gold today

Jim is making some bold predictions about the future of Comex.. which seem hard to argue against given the dire state of their available, deliverable inventory;

Regarding the inventory, as per Harvey,

Tonight, the Comex registered or dealer inventory of gold  remains below the 1 million oz mark at 950,441.152 oz or 29.56 tonnes.  This is dangerously low especially when we are coming up to the August delivery month.
Remember in June we had almost 31 tonnes of gold stand for delivery.  The total of all gold at the comex (dealer and customer) lowers again tonight breaking deeper below the 7 million oz barrier resting at 6.885 million oz or 214.17 tonnes.
link:     http://harveyorgan.blogspot.com/2013/07/total-comex-gold-falls-again-to-...

 

Regarding the future of the Comex, as per Jim,

The cause of today’s spectacular rise in the gold price is the reality that with Friday continues large drops in the Comex warehouse gold inventory. No cogent argument can be formed against the reality that because of the continued fall in gold inventory that within in 90 days or sooner the Comex must change its delivery mechanism.

The highest probability is that Comex will have to move to cash settlement rather than gold. Part of that settlement could be lots of 100,000 GLD that represents the ability to exchange for gold.

Their problem is that if GLD is part of the settlement mechanism for the spot Comex contract that GLD will be destroyed by the convertibility. It is a truism in gold that which is convertible into gold will in fact be converted over time.

Gold rose today because those knowledgeable know the inevitability of the changing of the Comex contract, as it is today which calls for settlement in gold between contracting parties. There is no question this is the emancipation of physical gold from the fraud of no gold, paper gold. The emancipation will cause physical gold exchanges to take birth and to be the discovery mechanism for the price of gold. This is the end of the ability to use paper gold future contracts as a mechanism to make the gold price sing and dance at the will of the manipulators.

With manipulation coming to an end the true value of gold will be discovered by the cash exchanges that are now taking birth. The advent of the cash spot exchanges around the world is the natural demise of the Comex set up as convertible and now being converted.

As long as one can buy spot, pay insurance, transportation and re-casted by Rand Refinery to Asian products sold profitably, the demands for real gold are ending the hay days or even existence of the futures exchanges.

Gold is headed back to be traded as it was before 1973. Gold will trade well above $3500 and those who have lived in the gold market like me for now 53 years know it.

A price of $50,000 for gold is not out of the question as a result of its emancipation from “fraudulent paper, no gold, paper gold.”

GOFO is screaming this truth. The warehouse inventory of every futures gold exchanger is screaming this. The fact that there is no meaningful above ground supply of gold is screaming this. The fact that most of the central banks supply of gold is leased is screaming this.

There is no reason why gold cannot move up hundreds of dollars a day when the Comex changes their spot contract settlement, as they must, as they will, very soon.

Respectfully,
Jim

link:  http://www.jsmineset.com/2013/07/22/comex-must-change-its-delivery-mecha...

SingleSpeak's picture
SingleSpeak
Status: Platinum Member (Offline)
Joined: Dec 1 2008
Posts: 506
That is an amazing 1 day percentage jump
Gold 1336.40 +43.10%

angel

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