-- Posted 23 July, 2009 | | Source: SilverSeek.com

The Metals:

Gold traded at about unchanged in Asia and London except for a brief spike up to $956.55 around 5AM EST before it briefly dropped as much as $5 to $948.30 a little after 9AM EST in New York, but it then rallied back higher for most of the rest of trade and ended near its high of $957.30 with a gain of 0.12%.  Silver traded modestly higher in Asia and rose to see an over 1% gain in London before it dropped to see a 9 cent loss at $13.62 a little after 9AM EST in New York, but it also rallied back higher for most of the rest of trade and ended near its new session high of $13.863 with a gain of 0.51%.

Euro gold rose to about €671, platinum gained $9 to $1178, and copper remained at about $2.52.

Gold and silver equities rose about 2.5% midday before they fell back off into the close, but they still ended with almost 1% gains.

ETFS Silver Trust issues silver-backed shares on NYSE - Reuters

The Economy:

Tomorrow at 9:55AM EST brings Michigan Sentiment for July expected at 64.6.

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Oil rose on renewed hopes for increasing demand and worries over gasoline supplies after some evidence of slowing refining activity.

The U.S. dollar index found slight gains as traders sold the yen and treasuries in order to put some capital to work in the Dow, Nasdaq, and S&P which rose throughout most of trade and ended with over 2% gains on better than expected earnings and economic data.

Among the big names making news in the market today were Ford, UPS, New York Times, Bristol-Myers and Medarex, Amazon.com and Zappos, AT&T, McDonald’s, Wyeth, CIT, and Union Pacific.

The Commentary:

“Dear CIGAs,

The rather surprising existing homes sales number combined with “not as bad as feared” earnings from some major firms, was enough to send risk appetite into the stratosphere this morning as the Japanese Yen had the stuffing beaten out of it. That set up hot money flows back into equities and particularly crude oil which served to bring in new buying and short covering in gold. That buying was enough to beat back the usual early morning gold rape complements of the bullion banks as trading came into New York this morning. Not to be undone however, the bb’s dug in above $957 and hit every single bid from the funds.

By the way, the idea that this selling is related to a mining company hedging production is without basis. I have been around these markets for more than 20 years and have seen more than my fair share of scale up selling by commercials. Selling of the nature that we continually see in the Comex gold arena as we did this morning, which attempts to force price downward rather than allowing it to rise and and obtain the HIGHEST possible price, is NOT producer hedging. Commercial hedgers DO NOT FIGHT upward moving markets. If buyers want to bid up the price of the commercial’s product, why fight them? Let the specs bid it up and obtain the greaest sale price for your hedge. The problem that we have with all the chatter that passes for market analysis these days, is that it is based on a speculator’s view of things which does not see markets in the same manner that commercials do nor does it understand scale up selling and scale down buying. That is because most of the guys around today are all momentum chasers and have no earthly idea what scale up or scale down even means anymore.

We also had the rather unusual press release from the USDA stating that they were going to resurvey farmers on the amount of acreage planted to corn. A few weeks ago, USDA stunned us all with a gargantuan acreage number that basically kicked the props completely out from beneath the corn market and sent it careening sharply to the downside. USDA’s mea culpa was the catalyst in today’s session for wholesale short covering and end user hedge coverage implementation which set the entire grain complex on fire. With crude and the products moving higher, along with the grain complex, the perma gold shorts at the Comex were very active in absorbing the tremendous amount of buying that flooded into gold.

In watching the price action of the HUI and the XAU, I was struck by the disconnect between their action and that of Comex gold. Mining shares were following strength in the broad US equity markets and at this hour are threatening  a clear technical breakout on the charts. The HUI is doing battle with the stubborn 360 level while the XAU is engaged in a conflict with the 150 level. Strong convincing closes above both levels by the respective indices will presage a test of this year’s highs made in late May. Yet, in spite of this, the bullion banks have continued to sell with reckless abandon at the Comex.

The other thing of interest this morning was the weakness in the bonds. If bonds appear to be trading in a schizophrenic fashion, it is because they are. After rallying sharply higher the first two days of this week on Bernanke’s Congressional testimony, suddenly they became anxiety ridden on supply issues as more US debt auctions hit the calendar. Traders continue to worry that with the massive supply that need to be sold to fund US profligacy, buyers are going to insist on higher yields before ponying on up to the bar.

Bonds look to me to be in a range trade with 121 on the top side bringing in selling while 112 on the downside is attracting buyers who seem to feel that yields at that level are a decent value considering the state of the economy. We will be watching carefully to see if anything changes in this regards as it has profound implications for the war between the deflationists and the inflationists. I might add, the deflationists seem to be losing the argument.

A breakdown of the 112 level in the bonds coupled with a move higher in the energies and metals, will mean that the market has voted in favor of the inflationists.”- Dan Norcini, More at JSMineset.com

“Dear CIGAs,

You will hear a great deal this week concerning the ease with which the Fed can exit itself from the enormous explosion in their balance sheet to over two trillion dollars.

This will be classic MOPE to be gleefully received by the Money Bunnies and Dancing Clowns on financial TV. I can only imagine how the airwaves will blast out the good news that there is no inflation on the horizon because the Federal Reserve is firmly in charge.

The Chairman may say that since the Federal Reserve pays interest on Bank Reserves that it can easily raise short-term interest rates. The MOPE on that is that due to a lower dollar there will be upward pressure on rates that must be offset by QE in order to attempt to prevent a total economic implosion. These conditions are not likely to change for a considerable period of time, thereby preventing any move by the Fed to pressure rates even higher. That method is total nonsense under present economic conditions.

The other position is that it can easily shrink its balance sheet by letting short-term credit run off and sell longer term assets to the public.

The nonsense here is that the items purchased from the financial system are the toxic items that the banks had no real means of valuing for which no market existed then or now. Only a permanent Pollyanna would think that these items are in fact full value to the accounted for figure. Many may well never function. Therefore sell what to whom is the real question.

Let’s not forget the massive swaps with other nation’s central banks to fund the bailout of their banks, systemic to US banks, and the demonic OTC derivatives. Turning around those swaps would destabilize currency markets for non-US central banks, therein causing them trade related currency problems.

Regardless of claims to the contrary, there is no practical method of draining the huge international monetary stimulation undertaken by the US Federal Reserve.

The inflation on the horizon is not a “demand pull” inflation but rather a currency event that will cause cost push inflation.

The Fed is boxed in and can only MOPE.”- Jim Sinclair, JSMineset.com

“August Gold closed up 1.5 at 954.8. This was 6.6 up from the low and 2.7 off the high.

September Silver finished up 0.07 at 13.77, 0.09 off the high and 0.16 up from the low.

The gold market showed some rather definitive two sided action during the action today. After showing some early strength gold prices fell sharply ahead of and into the US claims readings. The market managed to recover after the initial US data flow perhaps because the market was anticipating a favorable existing home sales report. With the existing home sales readings slightly better than some expectations and the readings posting a third straight month of gains, the outlook on the economy was certainly improved. With the US equity market gains strong enough to fan macro economic optimism it is possible that some gold bulls were disappointed with the magnitude of the gains in gold today. In fact, with a fresh downside breakout in the Dollar, periodic strength in energy prices optimism toward a number of physical commodities vastly improved, the gold gains did seem to be anemic to some players.

The silver market also started out with a minimally up beat tilt, but like the gold market, silver prices fell rather aggressively in the lead up to the first set of scheduled US numbers. From the morning low September silver prices initially managed a rally of 24.5 cents and with the equity markets putting in some very strong gains, the silver market seemed to be embracing a mostly positive outside market environment.”- The Hightower Report, Futures Analysis and Forecasting

GATA Posts:

Eckart Woertz: Gulf should follow China into real assets, gold

CFTC's hearings on position limits start next week

Senator scolds Bernanke: You promised transparency but didn't deliver

Fed 'embroiled' in politics, former St. Louis Fed chief says

The Statistics:

Activity from: 7/21/2009

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

 Note: Change in Total Tonnes from yesterday’s data: SPDR subtracted 5.8 tonnes and the LSE added 0.45 tonnes.

COMEX Gold Trust (IAU)

 Note: No change in Total Tonnes from yesterday’s data.

Silver Trust (SLV)

 Note: No change in Total Tonnes from yesterday’s data.

The Miners:

Newmont’s second quarter results, Entree’s (EGI) option agreement, and Klondike’s (KS.V) acquisitions were among the big stories in the gold and silver mining industry making headlines today.

WINNERS

LOSERS

Winners & Losers tracks NYSE and AMEX listed gold and silver mining stocks that trade over $1.

All of today's gold and silver stock news:

- Chris Mullen, Gold Seeker Report

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© Gold Seeker 2009

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