Friday, October 10, 2008
FROM CASEY RESEARCH ON YESTERDAY'S PM MARKETS
From Ed Steer: There was so little volume in Far East precious metals trading yesterday morning, that the prices could have moved significantly in either direction if there had been some serious buyers or sellers around. Ted Butler said it was the lowest volume day he can remember...certainly the lowest this year. Gold drifted from a high of about $909 in early Thursday morning trading in Sydney...down to its low of around $883 just after the Comex close in New York yesterday afternoon. Then, out of the blue, came a $38 dollar rally over a two hour period. My guess would be that this was a short covering rally by the boyz. I doubt this data will be in Thursday's o.i. numbers that will be reported later this morning. We'll probably have to wait until after the long weekend. Silver had a nice rise during yesterday's trading, but the volume was virtually non-existent...as only 12,500 contracts in silver were traded...and only 85,000 in gold. The Comex precious metals were trading on fumes yesterday. Gold open interest on Wednesday fell a whopping 8,459 contracts...and silver o.i. dropped a minuscule 23 contracts. The new COT will be out at 3:30 Eastern time today. As I said earlier this week..."it should be a sight to behold!" I'll be talking about it tomorrow. Some tidbits from the gold world on Thursday. The first item of note was taken from Bill Murphy's commentary over at lemetropolecafe.com...German gold dealers have stopped taking new orders for the precious metal as demand has skyrocketed. This is one sentence from a news story on the web site of Deutsche Welle...a German TV station. And according to the usual NY gold commentator..."The ECB (European Central Bank) reported that they had sold 7.79 tonnes" under the new year of the Central Bank Agreement on Gold. GLD was up about 60,000 ounces and there was no change in the SLV ETF. But the real gold news yesterday came from UBS gold analyst, John Reade...another story that I picked up at lemetropolecafe.com....and it's a dandy. First, the story that triggered Reade's comments... Record Dubai Commodity Exchange physical gold settlement (Reuters) "Dubai Gold and Commodities Exchange (DGCX) completed its largest-ever physical settlement of gold and steel reinforcing bar futures contracts with a total value of $25.2 million, it said on Wednesday. The settlement involved the delivery of 908 kg of gold and 40 tonnes of steel rebar for Oct 2008. No further details were available. Gold prices rallied more than 3 percent on Wednesday as investors rushed to purchase safer assets, while the worst financial crisis in nearly 80 years battered global stock markets. DGCX, which offers futures contracts in gold, silver, steel, fuel and crude oil and currencies, aims to become a major commodities centre in the region. Its activities almost doubled in 2007." Then Reade's comments: "This is a very interesting story that merits further investigation. We have heard investors, unable to get physical investment bars due to the safe-haven induced credit crunch, have bought Dec Comex futures with an intention of holding them to expiry. It seems that a similar trade took place on the DGCX. Historically we have discounted the chances of a physical squeeze of Comex gold because so few futures investors take physical delivery and, if they did, metal would be shipped in from London and Zurich. But the shortage of Comex-eligible bars may make the physical settlement of large deliveries ‘complicated’ to say the least. We will be closely monitoring this situation: if the market remains tight for kilobars over the next month or two then a squeeze in Comex gold could materialise. And if gold lease rates keep heading higher due to a supply/demand mismatch in the loco London market, the gold market could get very interesting into the end of the year." Yes it could...and probably will...if the gold and silver prices haven't already blown sky high before then.