Just a few items as we await a U.S. holiday tomorrow and the market logic holiday of BLSBS Friday.
The bounce in the metals has continued as we've moved through the week. It ain't much but we'll take it. At first glance, you would think it is primarily short covering but the total open interest in gold has been growing all week, which is quite a change from the recent past. In fact, since the market puke of $45 last Wednesday, the total OI in gold has grown by over 17,000 contracts as price has recovered by some $25. If you are looking searching praying hoping for signs of a bottom, growing OI with a rising price should be something that gets your attention. Additionally, DenverDave thinks we might have seen The Low, too: https://seekingalpha.com/article/1532442-gold-last-friday-was-likely-the-bottom. We'll see. The BLSBS and the reaction to it will go a long way toward determining if The Lows are in. For now, this chart looks OK but gold really needs to get back above $1300 before we can begin to relax a bit.
Silver presents a bit of a contrasting picture to gold. It's hourly chart looks like a reverse head-and-shoulder bottom but its OI is shrinking. Now much of this is directly related to July expiration last week...but...still. If the gold OI is rising on higher prices, I'd like to see silver doing the same thing. However, since the big drop last Wednesday, silver has recovered more than $1 while its OI has fallen by nearly 1,300 contracts. So this does look like short covering, at least at the surface. Let's see what the CoT report shows before jumping to any conclusions. Because of the holiday, this week's report basis yesterday, won't be released until freaking Monday! What a joke!! (Can you see now why the CoT is not a trading indicator? The info, once it's released. is stale. Helpful, but stale nonetheless.)
And the GLD continues to be drained, now down 28.54% since the first of the year. This is particularly curious given that the SLV "inventory" is only down 1.77%. In fact, in terms of sheer tonnage, the GLD has shed twice as much gold than SLV has shed silver. The GLD has dropped 385 metric tonnes of "gold" while the SLV has only dropped 179 metric tonnes of silver. Someday soon I'll make another post with row upon row of gold pallets in order to show just how much gold this is. For today, though, suffice it to say that 385.26 metric tonnes is 12,386,396 troy ounces OR 30,966 London good delivery bars OR slightly more than 161 of these: (That's a lot.)
All of the action and excitement is in crude this morning as the world watches developments in Egypt. The breakout to $102 is out of concern for supply disruptions through The Suez Canal and it's likely overblown. Let's see if crude can hold above $100 as we go through the rest of this week.
Speaking of Egypt, our pal Jim Quinn wrote an excellent article yesterday that made it all the way to The Drudge Report. If you haven't seen it yet, you can read it here: https://www.theburningplatform.com/?p=56966. The story that is being ignored by the mainstream media is that, once again, America is backing the wrong dog in the fight. Seemingly working under the adage "the devil you know is better than the devil you don't", the U.S. clings to support of Morsi while the future leaders of Egypt fume.
Which leads us back to U.S. Independence Day. Two hundred thirty seven years ago today, 56 gentlemen were meeting in Philadelphia, crafting the document which would declare American independence from British tyranny. The final text began with these two paragraphs:
"When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."
Eleven years later, after independence was won, a constitution was drafted and approved which set The United States of America as a beacon of hope and freedom for the entire world. Sadly, that light is being rapidly diminished. Has the current government become "destructive of these ends"? "Prudence will dictate" that changes should not be pursued "for light and transient causes". For me, the "abuse and usurpation" of nearly every Amendment to The Bill of Rights would seem to have placed us "under absolute Despotism". Therefore, it becomes "our right and duty to provide new Guards for our future security".
To this end and with firm reliance upon the protection of Divine Providence, I am prepared to pledge my life, my fortune and my sacred honor. Are you?
TF
