Have no fear – all is right with the world once again this morning. 
You may ask, what pray tell has transpired to create such harmonious vibrations and instill feelings of serenity and bliss in the hearts of men? Why the bond market stopped going down – isn’t it obvious! My goodness, even the pork belly market moved higher early this morning as the bonds bounced off their lows. I am not sure what the connection is between a slight reduction in interest rates and bacon consumption but no doubt some clever stock market perma bull will come up with a reason. After all, they had little difficulty in coming up with a reason to trip over their own two feet running their buy orders onto the floor of the New York stock exchanges. Watching the price action of the US equity markets makes casinos look rational and reasoned by comparison.
Sarcasm aside, bonds might have finally found a short term bottom. That does not mean the beginning of a new bull move; it simply means that they appear to be sold out for the immediate future as shorts ring the cash register and sit back trying to decide how to spend all the money they just made at the expense of bond bulls who keep talking up deflation. The bounce there allowed the “always pop up like a cork” stock market to do its usual thing. It also relieved a bit of pressure on the Euro which then allowed gold to move off its lows. In other words, the two factors that have recently been weighing on gold, the weak Euro and the collapsing bond market, were inhibited from working their black magic this morning and gold was freed from its moorings and allowed to float upwards. Bears resurfaced however towards the end of the session and knocked it back for having the audacity to poke its head upward into the plus column.
Gold will need to get a strong close above $660 to rattle the complacency of the bears who have pretty much been selling with impunity of late.
Eventually the market will realize that a rising interest rate environment is bullish for gold but for the short term gold is still captive to these gyrations in the bond market. When bonds sell off, gold is following it down. When bonds move up, gold is following them up. Since gold does tend to make its seasonal low in June, my thinking is that these dips in gold are being purchased by big money who are picking up all that the hedge funds are throwing away.
One thing worth mentioning is the volume for gold the first two days of this week in the gold pit has been rather mediocre even on the downside days. That might be a sign that bears are losing their enthusiasm for the downside so we will have to keep an eye on this.
This makes that support level just under the $650 level in the August very important. If the bears cannot crack it soon, we will see shorts begin covering and giving up on taking down further. Bears are running out of time. They had better do their worst soon or give it up.
On the delivery front, so far JP Morgan has taken delivery of 12,890 contracts for June. That is a tremendous amount of gold. I have been watching to see if any of that gold would be retendered and it has not. There are now only 470 contracts left open in June so there is no way that gold is going to be retendered this month. If Morgan does not show up as issuing next month (there are currently only 100 contracts open in July gold) or the month after that, it will be evident that some of their clients wanted to secure a large amount of gold. It is difficult to say what price level those clients picked up the gold at however. Since the bulk of those contracts were stopped on the first day of the delivery process, it is highly likely that they were old longs that had been put on last year when gold was trading below $600. The older the long the earlier it gets assigned in the delivery process.
Open interest continues to increase as more fresh shorts pour in and more spreaders come piling back in as well. This Friday’s COT report should be quite interesting to say the least. We need to see an end to this speculator selling for gold to turn the corner here.
Silver managed to run all the downside sell stops and after cleaning all of those out, then reversed upward. The reason? Who knows and who cares. The only market goofier than the US equity markets is silver. Trading the stuff is like playing with a yo-yo. It is nothing but a short term technician’s playground where the fundamentals are irrelevant. It simply does whatever it wants to do on any given day depending on which side throws the most money at it. If you want my advice, not that it is worth much when it comes to silver, buy the physical metal on price setbacks or high quality silver mining shares and leave the futures market to the big boys where they can rip and shred each other to pieces in their version of “Mortal Kombat”. As it was, silver could not hold its gains and surrendered them by the closing of the pit session.
The HUI continues to follow the broader stock market indices around like a puppy dog. When they go up, the HUI goes up; when they go down, the HUI goes down. This marriage will eventually end in separation but for now that is the reality of the situation. Technically the HUI still continues to find strong buying every time it approaches that 320 level.
It is stuck in a range trade exactly like bullion is. 
PS..
Mein Instinkt sagt am Freitag ist die grosse Entscheidungsschlacht.
Gruss
Eldo
… speaking of which, the mega hit series about the Mafia, the Sopranos, came to its 9 year conclusion on Sunday evening. For those not from the US or Canada, here is the deal on this much talked about TV show, of which I had only seen one live episode until Sunday’s finale: