Thursday, March 3, 2011

Gold And Silver vs The Non-Farm Payrolls Report

A trader from Wynter Benton's group of CRIMEX raiders, The Friends Of Andrew Maguire [FOAM],  has contacted Harvey Organ with an update on the succes of their groups reverse raid on the March CRIMEX contract.  Harvey posted a communique from a Loius Cypher in his Daily Gold & Silver Report :

"Wynter_Benton update on their recent raid

With permission, I can update the results of our raid. It was successful beyond imagination but that "success" has spawned even more questions about the price of paper silver going forward. It was reported by SGS that he heard that on Friday Blythe was offering 30-50 percent premium and that at least 4500 hundred contracts will stand for delivery. I am here to give you a more accurate update (and a first hand account of what happened on Friday Feb 25). Our group was detemined to stand for delivery going into Monday because we were not going to take a 30 percent premium on a price of $33.50. It was reported that Blythe offered 50 percent premium. That was not even close in our case. We got over 80 percent premium. That's right. Over $50 per contract on the condition that our group sell all our contracts. Our counterparty even threatened us with the ghost of Herstatt. They openly admitted that they could not deliver even 20 million ounces to us but that if we stood for delivery they would be sure that they make delivery to everyone else before they defaulted on us which would make us 'unsecured creditors'. They told us directly that they could not allow even 5000 contracts to stand for delivery because they could not deliver a mere 20 million ounces. Like Vito Corleone said, "I'm gonna make him an offer he can't refuse." And indeed we did not refuse as this was our intention all along.

These sets of facts from our traders lead us to believe that the paper price of silver may have a difficult time surpassing $36 because if the counterparty at the Comex is so willing to pay north of $50 to dissuade people from standing for delivery yet the paper price of silver is still under $35, then we suspect that losses triggered by derivatives is the main reason for the price suppression of silver. We can see no reason why they would not allow the paper price to go up yet are so glad to pay off the comex contracts to show the world that so few are standing for delivery. In our mind, Comex could default with if as little as 4,000 contracts stood for delivery. We are very curious to see how high the paper price of silver actually trades during this run.

Posted by Louis Cypher"

A $50 premium?  That's equal to $85 an ounce Silver....

Gold's test of the recent breakout at $1416 failed today and price has gone down to test support of the uptrend line around $1410-12.  All is not lost should the up trend channel be breached.  The recent leg up should remain safe and intact if support at $1390 holds.  This would be a welcome 38% retracement of this leg up off the $1308 low on January 27.

Though Gold and Silver were off 1.42% and 1.3% respectively today, Silver's "dip" in price appeared less severe than that in Gold, technically.  Round support at $34 has held up strongly today, but a retest of the breakout from $33.75 would be constructive, and welcome.

The stage has been set for tomorrow's hallowed non-farm payrolls report.  Nonfarm Payrolls are expected at 185,000, the Unemployment Rate is expected at 9.1%. The drums will roll at 8:30AM est. The crowd has been pumped up for the past two days with outrageous claims of positive economic recovery data. The Truth hurts. Expect the "unexpected", and a new surge in the Precious Metals.

Dave Kranzler, in his The Golden Truth blog post today, served up a painful dose of the Truth about today's jobless claims number:

Some General Analytic Commentary...Today's Jobless Claims Number Was

Total B.S. Today's jobless claims report from the Dept of Labor is being celebrated all over the media and by perma-bull idiots as proof the labor market is recovering. But let's look at the details, shall we? Please keep in mind that the headline number is a "seasonally adjusted" mathematic manipulation, the calculation of which no one outside of the DOL can figure out. The headline number reported 368k claims, a decline of 20k from the previous week. But let's look at what is really going on. Has anyone bothered to look at the "extended benefits" number. The extended program moves people from the weekly claims program to a program which enables jobless claimees to file for up to an additional 52 weeks, with a total of 104 weeks available. The details are LINK

The golden truth is that the number of people filing extended benefits increased to 850,372 - or an increase of 88,689 from the previous week. In effect, the number of total jobless claims actually increased by 68,689, the difference between weekly and extended. But in true Orwellian fashion the Government and media only report the weekly number in the headline and anyone paying attention to local news - print and television - will only hear about the headline number and worry that everyone else, other than themselves, is finding good jobs. Feel better now? Here's the report if you need to verify my math: LINK (there's actually several thousand additional claims in other categories but I'm too lazy to do the math).

The housing market. Yesterday the Mortgage Bankers Association reported its weekly mortgage applications index. The purchase index - the one that's relevant to assessing the health of the housing market, showed another decline of 6.5% from the previous week and a 19.6% decline from the same week a year ago. Double digit declines in this number from last year's already low index base indicates to me that the truth about the housing market is that it is starting to collapse again. It's also interesting to note that I'm finally starting to see some "non-conformist" mainstream analysts admit that housing is in trouble. Here's the report: LINK

QE_how_many? While media morons and Wall Street permabulls discuss the timing of the Fed potentially tightening its monetary policy and unwinding its QE programs - based on the logic of a strengthening economy based on arguably fraudulent data, but unarguably wrong data - the real question hanging out there is "who will buy all of the new Treasury issuance once QE2 is done?" This is given that, effectively, the Fed has monetized nearly all of the recent new Treasury issuance with QE2. If QE3 doesn't happen, where will the funding for our Government come from? Assume tax revenue continues to decline, especially inflation-adjusted, and that the Federal Government will never cut actual spending. Until someone can present me with a fully-supported argument explaining how this will happen, expect QE3, then QE4, etc ad nauseum ad dollar gold?
Watch The Highlight Of Today's Congressional Hearing: Ron Paul vs The Bernank

Bernanke Signals No Rush to Tighten When Asset-Buying Ends
By Scott Lanman
Federal Reserve Chairman Ben S. Bernanke signaled he’s in no rush to tighten credit after the Fed finishes an expansion of record monetary stimulus, seeing little inflation risk and still-slow job growth.

A surge in the prices of oil and other commodities probably won’t generate a lasting rise in inflation, Bernanke told lawmakers yesterday in semiannual testimony on monetary policy. A “sustained period of stronger job creation” is needed to ensure a solid recovery, and the Fed’s benchmark rate will stay low for an “extended period,” he said.

The comments suggest Bernanke will keep the Fed on course to complete $600 billion of Treasury purchases through June under the second round of so-called quantitative easing. He pledged to act if higher commodity prices persist, spurring inflation and increasing inflation expectations.
To put that in laymans terms:  Dollar Down, Gold Up

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