Tuesday, August 31, 2010

Breaking Down The Walls

"Unfortunately, neither Bernanke, nor Obama is capable of saying what needs to be said, or doing what needs to be done. Unless and until they are, all the yapping by Obama and Bernanke will be as productive as giving a bullhorn to a bullfrog.''
-Michael ''Mish'' Shedlock

Gold Poised for Biggest Monthly Advance Since April on Investment Demand
Kim Kyoungwha
Gold is set for the biggest monthly advance since April as signs that the global economic recovery may be faltering prompt investors to boost their holdings to try to preserve their wealth.

Gold for immediate delivery was little changed at $1,236.20 an ounce at 12:56 p.m. in Singapore, climbing 4.7 percent this month. The metal, which reached a record $1,265.30 an ounce in June, climbed 5.9 percent in April. The December contract in New York was also little changed today at $1,238.50 an ounce.

“Driven by stronger investor interest, gold prices have made significant gains lately,” Eugen Weinberg, head of commodity research at Commerzbank AG, wrote in a report. “As long as weak economic data releases continue, investor interest should remain high.”

Analysts have raised 2011 forecasts for gold more than for any other precious metal in the past two months, predicting a 10th annual gain, data compiled by Bloomberg show. Gold may rise as high as $1,500 next year, according to the median estimate in a Bloomberg survey of 29 analysts, traders and investors.


And Gold looks eager to challenge that April move this morning as August comes to a close. Gold is at $1244 up over $8 as I type this at 9AM est. this morning. Silver is roaring to life off it's overnight low of 18.80, and is at 19.22 here and now.

Home Prices in 20 U.S. Cities Rose More Than Forecast in June
By Timothy R. Homan
Home prices in 20 U.S. cities rose more than forecast in June from a year earlier, reflecting the influence of a government tax incentive and a sign the market was stabilizing before sales plunged in July.

The S&P/Case-Shiller index of property values increased 4.2 percent from June 2009, the group said today in New York. The median estimate of economists surveyed by Bloomberg News called for a 3.5 percent advance.

The Case-Shiller index is a moving three-month average, which means the June data are still being influenced by transactions in April and May that may have benefitted from the government incentive. A pullback in demand since the credit ended, mounting foreclosures and an unemployment rate near a 26- year high may weigh on prices in coming months.


"More than expected"! Well la-dee-da... This "news" only reinforces the obvious, US Government tax subsidies didn't save the housing market, they only slowed it's plunge by pulling sales forward...and robbing home buyers of even better pricing deals to come in real estate as home prices continue their reversion to the mean...and below.

The Yen is up again, the Euro is up...AND THE DOLLAR IS DOWN.

Recovery? I tell you what's recovering...The American hang over that lead to the election of The Obama and this pathetic Congress. America is recovering it's senses, it's focus...real change is coming in November.

Poll: GOP takes unprecedented lead in midterms
Republicans lead Democrats 51% to 41% on a generic ballot heading into November's midterm election, the largest gap in favor of the GOP in Gallup's 68-year history of tracking the critical political benchmark.

The Republican lead has steadily increased from 5 percentage points earlier this month to the 10-point spread, suggesting Republicans have the upper hand and momentum.

Previously, the largest GOP advantage measured by the poll, 5 points, was found in 2002 and 1994. Republicans made significant gains in the U.S. House both years.

"The last Gallup weekly generic ballot average before Labor Day underscores the fast-evolving conventional wisdom that the GOP is poised to make significant gains in this fall's midterm congressional elections," according to Gallup's website.

Republicans are twice as likely as Democrats to be "very" enthusiastic about voting, according to the poll. Half of Republican registered voters said they are "very" enthusiastic, compared with 28% of independents and 25% of Democrats.


Gold hits $1246...

Focus on Silver
Gene Arensberg
Silver turned in an “outside reversal” Tuesday, August 24 (which happened to coincide with COT reporting cutoff day), and in the process it surged up and out of the wide triangular consolidation which, as regular readers know, we have been following here at Got Gold Report all along. An outside reversal occurs when the trading breaks below the previous day’s lows and then reverses to close higher than the previous day’s high. Outside reversals often, but not always, mark significant turning points and technically minded traders view such action as a more bullish event.

Outside reversals are fairly common. What separates the “impressive” outside reversals from the mediocre in our own opinion, can be measured by the “follow through” which occurs or doesn’t occur immediately following the event.

In this particular event silver reversed, turning a potential 23-cent loss into a 35-cent gain on Tuesday, and then followed through with another 56-cent advance on Wednesday. That’s impressive. For the week, silver surged USD $1.07, an advance of 5.9%, strongly outperforming its larger cousin gold, which added $10.15 to $1,237.88, up 0.8%.

The fact that the new silver surge occurred just ahead of options and futures expiry (even if it was just the “who cares” August contract) makes it all the more impressive to us. It suggests that even in the light liquidity of August, the Big Sellers of gold and silver were unable to use their CFTC-granted COMEX futures position limit exemption trading advantage to overwhelm buying pressure to the downside as has happened so often in the past at this time of the trading month.

We can all conclude that something material has changed in the COMEX futures silver market.
Silver has surged in late August. Something has potentially changed. Silver has broken out of its triangular consolidation and is now challenging its longer-term resistance and the area that has been heavily defended by the Big Sellers of silver in the recent past (in the $19s).

We also note that silver closed the week in minor backwardation with the cash price at $19.06 and the near-active September ’10 contract at $19.03 – meaning that there was heavier demand for actual physical silver than there were sell orders to accommodate it and/or traders were unwilling to wait a fairly short time for metal even though it would be less expensive. Most traders view backwardation in silver, even the most minor of examples of it, as more bullish than bearish short term.

In addition, the September contract shows a 13,880 contract open interest with first notice day looming just ahead on Tuesday, August 31. That represents about 69 million ounces of silver metal which “could” be stopped for delivery. Not all the September contracts will actually be delivered into, but the potential is interesting because there is not 69 million ounces of physical silver in the Registered category today at the COMEX. Indeed, as of Friday’s CME report, the COMEX warehouses held about 51.9 million ounces of Registered silver.

Another roughly 59 million ounces are currently stored in the COMEX vaults in the Eligible category. That silver could be coaxed into the Registered category at some price theoretically.

We mention the COMEX inventory to show that it would not take all that many silver contracts standing for delivery to completely exhaust the relatively small amount of physical silver metal that backs up all the COMEX contracts trading today. The open interest plunged by 4,663 contracts to 124,185 contracts open in this week’s COT report (roughly 621 million ounces worth), but with the sharp rally the open interest was back up to over 128,000 by Thursday.


Harvey Organ notes in his Daily Gold & Silver report:
What is even more alarming is that the current silver Comex OI and the amount of silver standing this delivery month of September was 6400 contracts or 32 million of silver. We must wait for the end of the monthto find out how many options were exercised. Needless to say we have a "Houston we have a problem".

Adrian Douglas today pointed out that the silver lease rates spiked on the month contract to over .6%.Please remember that they have been negative for quite some time.This means scarcity of metal and the Comex is having fits trying to obtain the necessary metal to satisfyour patient longs who have been waiting months for their metal.

It should be noted that many investors have been waiting patiently, as far back as March of this year, to receive delivery of Silver they stood for under contract. The threat of a September default in CRIMEX Silver grows by the day.

After opening down this morning, the DOW is now green. The NIKKEI 225 in Japan was down over 325 points last night. The plunge protection team works wonders...

"...the gold market is an economic signal that cannot be ignored, no matter how much the powers that be want you to. If the powers that be are trying this hard to suppress this invaluable economic signal, then this is one ominous sign that we are in for a large economic ‘adjustment’ period."
-Robert Kientz

Be right, and sit tight...or add to your positions. The age of economic cataclysm is upon us.

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