"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Monday, March 28, 2011

Internal notes on Gold and Silver open interest and deliveries

Open interest in both gold and silver were down for Friday's session. Rollovers continue in gold with the specs moving out of the April and into the June. For all practical purposes, June is now the most active contract although volume in the April is still higher. That will end by Wednesday this week.

Some of the weakness in gold is still associated with these rollovers continuing as the inability of gold to continue pushing through $1440 last week has engendered some light long liquidation. Once we clear option expiration and the rollover activity, we will be able to get a better sense for where the market is heading next. For now it is still consolidating above $1410.

Silver too experienced some long liquidation on Friday with some of the longs ringing the cash register after it was unable to keep pushing through the $38 level.

Open interest remaining in the expiring March contract is now down to 388 contracts. Deliveries for tomorrow will be lead by Morgan for its own account. Barclays is the largest stopper once again for clients. As stated last week, Barclays has some clients who want to take delivery. Total deliveries for March thus far are 1,417.

March silver remains at a premium to the active May of about a half a cent but May is slipping some in relation to July and is now trading at a 2 cent discount to it. While the backwardation structure on the overall board is noteworthy it is not dynamic enough to keep the front 3 contract months in a full backwardation mode. That takes some of the bullishness out of it somewhat compared to what I would consider it were March and May both trading at a premium to the July. I will continue watching to see how these spreads behave as we near the end of the month.

The HUI is lower today falling further from the 580 level and establishing that as an important technical chart resistance level. It is well off its worst levels of the session however and should it be able to close the day near current levels (563) it would be somewhat of a moral victory of the bulls after the disappointment of last week's inability to clear 580.  The index is trading above all the major moving averages but the 10 day is below the 20 day which is not what one wants to see for a market that is in a bullish posture. The index will need to stabilize near its current level and hold here for the next few days to allow the shorter term 10 day moving average to make a bullish crossover of the 20 day. Downside support is near 549 - 546. I would not want to see the HUI below 538 for any length of time as that would move it back down to 520.

Silver - 8 hour chart update

Gold - 8 Hour chart update