Gold did very well for itself in Far East trading on Thursday, as once the Hong Kong gold market opened at 9:30 a.m. local time, the gold price began to rise in fits and starts until shortly after 4:00 p.m. in Hong Kong. From there, it basically did nothing much of anything until the New York open yesterday morning where the U.S. bullion banks stepped on the price. But once the London p.m. fix was in at 3:00 p.m. London time [10:00 a.m. in New York] a rally ensued that took the gold price to a new record high price [1,062.40 spot] at precisely half past lunchtime on the East coast. From its high at that point, gold got sold off until Comex trading was through for the day... and from there it traded sideways until the 5:15 p.m. New York close.
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The silver action mirrored gold almost identically; and, like Wednesday, the silver and gold charts were hard to distinguish from each other unless you looked at the prices.
As far as open interest changes for Wednesday are concerned, there was pretty big volume in gold once again. 150,203 contracts traded, driving the open interest up to another big number... 482,695 contracts. And despite my opinion yesterday that open interest would show a hefty increase, I was pleased to see that it actually declined 1,612 contracts... which is not a lot considering the whopping 32,995 contract increase on Tuesday.
Silver open interest fell as well... down 384 contracts. Volume was pretty decent at 31,901 contracts. Total open interest is now sitting at 131,417 contracts. On Tuesday's big up-day... silver o.i. rose 4,884 contracts, so 'down 384 contracts' isn't much of an improvement.
When the Commitment of Traders report [and the Bank Participation Report] becomes available at 3:30 Eastern time this afternoon, we'll probably see the U.S. bullion banks short over 30 million ounces of gold for the first time in history... that's if the 33,000 increase in Tuesday's open interest has all been reported... and regardless of that, the Bank Participation Report will be beyond ugly. I'll fill you in on all the details on Saturday.
The CME Daily Delivery Notices showed that 105 contracts of gold... and one [1] silver contract are scheduled to be delivered on Monday. Neither the GLD or SLV showed any changes in their alleged holdings yesterday. The U.S. Mint had another tiny update in their eagles production yesterday, reporting another 2,000 gold and 75,000 silver eagles added to their monthly totals... which now stand at 28,000 and 357,000 respectively. The silver eagle mintings are so tiny, that Ted Butler is wondering if the U.S. Mint is having the same problem as the SLV ETF... there's no silver in quantity is to be had by their planchet manufacturers.
The Comex-approved warehouses showed that 801,739 ounces of silver were added to their inventories. As of the end of business on Wednesday, the four silver depositories [Brink's, ScotiaMocatta, HSBC and Delaware] showed a total of 116,159,278 troy ounces in stock... about the lowest level in several years.
The usual New York gold commentary reported the following yesterday... "India was an importer again today. This rather surprising result is in large part due to the continued firmness of the rupee. The rupee has now gained 13% since its mid-March low. Of course, with both the currency and world gold very active today, Indian dealers could well be protecting themselves by "spreading out" their prices and minimizing business. The point, however, is that Indian buying is extremely likely on any attempted sell off, such as is being seen in NY this morning."
"Vietnam local gold stood at a $4.10 discount to world gold of $1,049.40 early today. In Q1, when gold briefly surpassed $1,000, discounts approached $30 and Vietnam was a heavy exporter. That is not happening at present."
"TOCOM continued to liquidate. The public slashed a startling 8.38 tonnes (22%) from their long position, leaving only 29.6 tonnes."
"As the late share action yesterday forecast, a determined effort to run gold up was seen in the early morning today. Mitsui-HK notes: When a sweep of about 700 lots in Globex took gold above $1,051... buy-stops were triggered."
"Around 3AM NY time spot gold got to $1,058.70, with Dec gold up $15.20. Predictably heavy selling appeared on the Comex open – estimated volume at 9AM was 74,798 lots. This will be giving the Indian dealers (who work in their evening) something to do."
"An options-literate friend points out that, given the premiums The Gartman Letter would have been paid for writing gold calls yesterday, the effective sales price established could be as high as $1,069. This makes more sense, but will still hearten some of gold’s friends. TGL today amplifies its fears of excessive gold enthusiasm, but expresses an intention to buy toward $1,000-$1,020"
Then, in the wee hours of today [Friday morning] the N.Y. commentator filed another report entitled "Vietnam Premium Returns". I will cherry-pick this commentary as well...
"Thursday's gold price action was a brawl from start to finish. As presaged by Wednesday's late gold shares, gold surged in the Asian and early European day, peaking around $1,058 about 3 a.m. NY time -- December gold was up some $15.20. It then drifted into the NY open... at which point it was hit by massive selling. Estimated volume at 10 a.m. was an enormous 114,315 lots. Having bottomed down 60c, gold then bounced back to peak up $18.30 on the day just after 12 noon, before losing some ground into the close. Estimated aggregate volume was 183,457 lots. Trading slowed considerably after 10 a.m... and Euro gold notably tracked US$ gold very closely during the floor session."
"Open interest behavior will be unusually illuminating [Yes, it will - Ed]. Gold's opening sell-off could have been long liquidation. This could help sentiment."
"The gold shares did not like the day. From being up 3.1% and 2.9% respectively at gold's high, the HUI and XAU sulked at the subsequent softness and closed up only 1.43% and 1.38% respectively. The Central Fund of Canada's bullion vehicle closed with only an 8.4% premium."
"Comforting for gold's friends, Vietnam local gold went back to a premium on Friday morning: $1.35 with world gold at $1,046.80. The unofficial dong rate firmed somewhat."
Dow Theory Letters Richard Russell has been pounding the table on gold for some time, but he reached a new level of enthusiasm this past evening: Meanwhile, a great bull market starts... a bull market that mirrors the demise of the dollar. Gold is priced in dollars, and as the dollar weakens, it takes an increasing amount of fiat dollars to buy an ounce of gold. Beginning in 1999, gold started up in a primary bull market. In my personal opinion, this is fated to be one of the greatest bull markets in history. It will be a bull market built on not one, but two powerful human emotions -- both greed and fear. The speculative third phase lies ahead. Slowly but surely, the US public will finally realize that the US government is bankrupt both morally and monetarily. People will panic into gold... I believe that there will be a world panic to buy gold. This will set off one of the wildest and most explosive bull market in history." [This can't come a moment too soon to suit me! - Ed]
Yesterday I ran a story about how the Q2 OCC derivatives report was under-reporting the total U.S. bank derivatives, because it did not include what was in the bullion bank's separate holding companies. This drew a response from GATA consultant Rob Kirby, and his comments [in their entirety] are quoted below...
Ed; "The discrepancy in the OCC derivatives figures is all explainable. Understand that the most current numbers from the OCC are Q2/09. The likes of Goldman, Morgan Stanley, Merrill [their derivatives are now co-mingled with BofA] – all with $30+ Trillion [derivatives] books – only became banks and thus subject to OCC reporting as of Q1/09. This is why the OCC figures suddenly showed a dramatic spike in outstanding notionals."
"There are some more interesting details in what is/isn’t reported in those numbers like: Goldman at the Commercial Bank reporting level shows a derivatives book of roughly $40 Trillion and ZERO precious metals derivatives."
"However, at the BANK HOLDING COMPANY level, Goldman’s derivatives book is reported as being roughly $47 Trillion in notional BUT we get no break-out or description of any kind regarding its composition. The OCC only gives a break-out on Commercial Bank data."
"I’m convinced this is done to give the public impression that Goldilocks does not play in precious [metals] but there is [the] small matter of the hidden/obscured $47 Trillion dollar salami." Best. Rob Kirby"
Below is a chart that doesn't need too much explanation. I stole it from an article written by Puru Saxena that was posted over at 321gold.com. He, in turn, borrowed it from stockchart.com. I felt that it was certainly worth reprinting here.
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My first offering of the day is from The Wall Street Journal. It bears the headline "U.S. Stands By as Dollar Falls". It appears that Asian central banks are intervening to slow the dollar's fall. You require a subscription to read the whole article, but the first three paragraphs that are provided are worth your while... and the link is here.
In the next piece, it's obvious that the "Strong Dollar" mantra of former Treasury Secretary Robert Rubin now means a steadily weakening dollar. This Bloomberg article is headlined "'I Believe In Strong Dollar' Turns Relic as China Begs Stability"... and the link is here.
Robert Fisk of the Independent in London, whose story Tuesday about an international plan to replace the U.S. dollar as the main form of payment for oil trading, rocked the currency and precious metals markets -- was interviewed for about four minutes by the Russia Today television network. The interview is worth watching... and the link is here.
The next item is from the Financial Times in London. In the story, the paper acknowledges the Federal Reserve's political problems. Congressman Ron Paul and his new book, End The Fed, has become a rallying cry in the demonstrations against the government across the United States. Congressman Paul figures prominently in this article. The headline reads "New Monetary Target"... and the link is here.
And lastly is this gold-related Reuters story filed from Beijing and Shanghai. It's not overly long, and is definitely worth your time. The headline reads "China's gold investors undeterred by high prices"... and the link is here.
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Under capitalism, men provide for themselves; while under Socialism they are provided for. -
Ludwig von Mises
I note that during Far East trading during their Friday, that prices have been eroding in both metals as the U.S. dollar got a boost. London has been open for about an hour as I write this... and gold is down about $17 from its high in New York yesterday, and about $10 from its open in the Far East. I don't have a crystal ball to tell me what's going to happen next. The only two possible outcomes for gold and silver prices [which I've spoken of ad nauseum for over a month] are still in play... and what path we take will be decided in New York trading at some point in the future. Since today is Friday, it could be another interesting day when the U.S. bullion banks show up for work.
I hope you have a great weekend, and I'd like to take this opportunity to wish all my Canadian readers a happy Thanksgiving.
And to all of my American readers that get Monday off... enjoy your Columbus Day holiday.
I'll see you on Saturday.
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