"GFMS Cooks the Books to Make Gold Look Bad"

Gold rose a couple of bucks in Sydney yesterday morning... but that rally got capped the moment that Hong Kong opened for business. From there, gold 'fell' about $9 into the London open, which was the low of the day. From there, not much happened until shortly after 9:30 a.m. in New York where a buyer showed up and the price was up about $10 in less than half an hour... along with a corresponding decline in the U.S. dollar. Whether it was a new buyer or short covering was hard to tell. Gold's high of the day was around $945... and every attempt to break through that to the up-side ran into a seller.

The usual New York gold commentator had the following to report on yesterday's activity... "Whatever was happening in the foreign exchange markets, it is clear a large buyer entered the bullion market. Estimated Comex volume jumped 33,761 lots between 9 and 10 a.m... which turned out to be 40.4% of the day's entire estimated trade of 83,466 contracts. The p.m. fix, a physical event, came in at $943... $8.75 above the a.m. gold fix. Only an estimated 21,000 lots traded after 10 a.m... which is, after all, 75% of the day. Altogether, a very unusual trading pattern."

You may note that this new low for the U.S. dollar [in the last five trading days] did not help the gold price much. The dollar is now 40 basis points lower than it was at Friday's close when gold was in the $960 range. So, when someone says that gold and silver did this, because the dollar did that... I say B.S... because I know better. And so, dear reader [by now] should you.

Silver, once again, was at centre stage... as gold was just a side show. It's been many a moon since silver got bludgeoned like that in the Far East... and, without a doubt, the U.S. bullion banks [read JPMorgan] were in out in force in the New York Access Market in the wee hours of Wednesday morning. This was a bear raid extraordinaire in both metals... but it was silver they were really after... and they nailed it hard. Silver made a new low [$13.49] for this move during Comex trading at 8:30 a.m. yesterday morning. Without a doubt, a huge number of spec longs were taken out of their positions yesterday... and we'll find out this morning just how many were. Don't forget that silver is at the centre of the universe for 'da boyz'... so don't get too dazzled by what's going on in gold at the moment.

Open interest for Tuesday showed more declines... which [in yesterday's commentary] I mentioned it might. Since nothing much happened in gold and silver on Tuesday, it was my opinion that this would be late reporting from Monday's slaughter. In gold, o.i. fell another 3,948 contracts to 373,810... on very small volume of 57,897 contracts. Silver o.i. fell another 884 contracts to 103,527... on 29,239 contracts traded. Hopefully all these numbers will be in tomorrow's Commitment of Traders report. As I mentioned in the last paragraph, I'm also hoping for another big improvement in silver o.i. today... based on that new low for the move set on the Comex yesterday. Unfortunately, this number won't be in the COT report until the report on Friday, August 28th. As I've mentioned in previous commentaries, the bullion banks like to save some of their biggest raids on gold and silver for Wednesdays, just so the results won't show up in the COT for another ten days. Yesterday's trading activity was a perfect example of that.

The Comex Delivery Report for Wednesday showed that another 182 gold contracts were delivered. There was no reported activity in silver. There were no changes over at GLD or SLV, either. But the U.S. Mint had a rather substantial update to their eagle mintings yesterday. In gold eagles, they produced another 13,000 for a total of 45,000 in August so far... and in silver eagles, an impressive 225,000 were produced, bringing August's total up to 1,105,000. As an aside to these incredible production numbers in silver eagles so far this year, both Ted Butler and myself have excellent connections in the retail precious metals market... and we both know that nothing much has been happening in retail silver sales for quite a few months now, so we're both sort of wondering who the buyers for all these silver eagles might be. And lastly, over at the Comex-approved warehouses, another 132,597 ounces of silver were withdrawn.

The usual New York gold commentator had the following additional comments to add... "This morning, at 9:30 a.m., the Dollar Index collapsed. While initially gold in US$ and Euro both leapt, euro gold has now lost all its rise, while the gold remains up some $10 intraday. This is the most extreme divergence in a considerable time. One might almost think Eurogold is targeted. Estimated volume at 11:00 a.m. was a reasonable 68,020 contracts."

"Depending on the nature of the buyer today... Reuters suggest 'buy stops'... perhaps things are about to get interesting."

I have a number of stories today. The first one has already received some serious media coverage. The headline in the Washington Post read "Deal Marks End of Era for Swiss Banking." I was frankly surprised by it, as there had been a story about this at the end of July that the Swiss government had promised to block such disclosures by its banks. Apparently that was not the entire story. I thank Donna from Florida for sending this along, and the link is here.

Here's another interesting item sent to me by reader Charles Dubelier. It's a pictorial representation of how hard times have hit Dubai in the UAE. You'll have to use the 'pause' button on the pictorial display, as they advance too quickly to read the captions that go with each picture... and they are definitely worth reading... all of them. This piece is posted at the fastcompany.com website... and the link is here.

Yesterday I ran a story about hyperinflation in Zimbabwe... and when I saw the following GATA dispatch yesterday, I could hardly believe what I was reading. It appears that Gideon Gono, the governor of the Reserve Bank of Zimbabwe is talking about a new convertible 'Zim Dollar' backed by the mineral assets of the country. The long preamble by GATA's secretary Treasurer, Chris Powell, is also worth the read... and the link to the dispatch, entitled "Could Zimbabwe show Africa how to find prosperity?' is here.

In a Bloomberg story yesterday is this headline... "Gold Demand Shrinks to Six-Year Low on Recession, Council Says". I suggest you have a full salt shaker nearby...as this story will require a lot of those grains of salt when you read it. The link is here.

Gold Fields Mineral Services and the World Gold Council [at the centre of the previous story] are both regarded with deep [and probably justifiable] suspicion by everyone associated with GATA. Board member Adrian Douglas goes ballistic about the contents of the prior Bloomberg piece in this last story of the day, which is also a GATA release. It's entitled "GFMS cooks books to make gold look bad". It's certainly worth the read... and the link is here.

Tyranny is a political corollary of socialism, as representative government is the political corollary of the market economy. - Ludwig von Mises

I note, as I look for the 'send' button, that gold and silver rallied nicely in Sydney and Hong Kong earlier in Thursday trading. This lasted until it appeared that prices were starting to get too 'irrationally exuberant' around 3:30 p.m. in the Hong Kong afternoon session. Then it appeared that one of the usual N.Y. not-for-profit sellers showed up. London is barely open as I write these words, and it's too soon to tell how the precious metals will fare. But the real action will most likely start at the Comex open in New York... and who knows what will happen then.

See you on Friday.