One European Central Bank Was a Net Buyer of Gold Last Week

Gold rose about four bucks in Far East trading yesterday morning. This little rally lasted until the open of trading in London... and from there gold got sold off about eight dollars... with the low coming around the time of the London silver fix at noon their time... 7:00 a.m. in New York. From there, and until the London p.m. gold fix at 10:00 a.m. Eastern time, gold gained all eight dollars back. Once London was closed for the day, the U.S. bullion banks pulled their bids, and gold fell about seven dollars in half an hour. From there, gold recovered somewhat, but really caught a bid in the last 15 minutes before Comex trading ceased... and even gained a few more dollars in electronic trading. And wonder of wonders... the gold price not only closed in positive territory... but on its high of the day as well!!! I believe that's the first time this year that's happened... at least that I can remember.

Silver had about the same ride as gold... but the price swings were a little more pronounced. Silver was down a dime by lunchtime in Hong Kong... but rallied a bit as the afternoon wore on, and an intermediate top came [like gold] at the London open. From there it got sold off about 30 cents going into the London silver fix at noon over there... gained a large chunk of it back by the London close... then lost most of that gain by noon in N.Y. Then a really spirited rally began that ended with a vertical price spike at the Comex close. This got capped the moment that electronic trading began... and that was basically it for day. Silver did not finish on its high, but close enough for me.

Even though both metals put in an impressive day... with an equally impressive close... the shares still suffered when the general stock market hit the skids yesterday.

Open interest for Monday showed the expected improvement in gold o.i... down 10,629 contracts to 382,383... on volume of 79,796 contracts. Silver's o.i. actually went the other way... up 247 contracts to 105,057... on decent volume [no switches or spreads in this number] of 21,327 contracts. I'm not surprised at the silver o.i., as the metal was never subjected to the same hammering that gold was in Monday trading... and silver actually finished positive on the day if you remember.

According to the Comex Delivery Report, the second day of delivery into the September contract showed that seven gold and 247 silver contracts were delivered. The 247 silver contracts represents 1,235,000 ounces. The big issuer was The Bank of Nova Scotia with 201 deliveries. They were also the big stopper [just like they were on Monday] with 232 contracts received. It's my opinion that the Bank of Nova Scotia may be one of the big silver shorts as well. There were no changes in the alleged holdings of either SLV or GLD yesterday, either. The U.S. Mint had no report... and over at the Comex-approved warehouses, there was lots of activity, as all four warehouses were busy yesterday. By the time the smoke cleared, a rather chunky 1,565,635 ounces had been taken into inventory. With September being a huge delivery month for silver, Ted and I were surprised that these amounts weren't showing up at the warehouses last week.

The usual New York gold commentator had the following comments today... "The Bombay Gold Association, continuing its newly loquacious habits, has announced India's gold imports for August are in the range 10-12 tonnes... down 85% from August '08. For the Reuters story on that, click here."

"August '08, however, was a month of stunningly high imports, with gold suddenly slumping over $100 to the low $800s... and the rupee being helpfully strong. The more relevant point is in that, in its weakest month seasonally, with gold expensive, India was still an importer."

"Similarly, Turkey's gold imports for August fell 74% from last year 12.517 tonnes. But again, for the same reasons, August '08 was a stupendous month--in fact 25% of the entire Turkish imports for the year occurred then. The more important point is that imports were down only 16.8% below July, despite the onset of Ramadan, and only the second double-digit import month since last September."

"The European Central Bank's weekly statement of condition indicated 'gold and gold receivables' by one captive central bank rose €2 million last week [0.9 tonnes] because of the 'purchase of gold coin' by one captive central bank. Last week's number was a 0.37 tonne sale. A strange statement and possibly an unprecedented event in the WAG [Washington Agreement on Gold] history: but in any case, the ECB echelon of CBs continue to seem to be out of the market."

I have four stories today, of which the first two are gold-related. The first is posted over at mineweb.com. In it, the writer reports on the analysis of gold market expert, Jeff Nichols, who stresses the changing and more positive attitudes of central banks toward gold. Williams' report is headlined "Turning Point for Gold as Central Banks Become Buyers"... and the link is here.

The next gold story is a Bloomberg piece which Craig McCarty sent to me late last night. In it, Standard Bank Group's technical analyst, Darran Grabham, says that "Gold may advance to a record $1,325 an ounce if it first breaks out of a symmetrical, triangular pattern, a move that may occur in the next one or two weeks." Let's pray that he's right. The link to the story is here.

The next two stories have to do with the Fed. Both are worth the read. The first one is from Congressman Ron Paul. It's a short piece entitled "The Fed's Interesting Week" and the link is here.

The next story, dear reader, is a little longer... but is well worth your time, as it's a fascinating piece. It's the Reader's Digest version of the story of the U.S.'s first central bank... and the man who ran it... Nicholas Biddle. In it, the writer compares Biddle to the current Fed chairman, Ben Bernanke. The parallels are astonishing. The article, posted over at mises.org is entitled "The 19th-Century Bernanke" and the link is here.

Unchecked, government social programs are a security threat because they weaken the ultimate line of defence: the free-born citizen whose responsibilities are not subcontracted to the government. - Mark Steyn

I've been seriously involved in the gold market for about nine years now... and never have I felt this strongly that both silver and gold are about to make a major move to the upside [notwithstanding our friends at the U.S. bullion banks]. For my readers who are sitting on the sidelines, waiting for it to happen... you may find yourself left far behind if you don't act soon. I urge you to check out Casey Research's site "The Best Gold Investment You've Never Heard of". It's certainly worth your time, and the link is here.

One of the reasons I get into these bullish frames of mind that I alluded to above, is when Ted Butler writes a new piece. Well, he did yesterday... for subscribers only... and it was the most bullish commentary I've ever seen from him... and I've read every word he's written [over the last ten years] at least three times. Knowing Ted the way I do, I've really got to get this guy on Ritalin as quickly as possible before his bullishness consumes even me.

As I've said before... I'm "all in"... and will stay that way until this precious metals market hatches into something... notwithstanding this 22+ million ounce gold short position that overhangs the market. Someday this short position won't matter... and someday I expect that we will end up with a market that is "no ask" rather than "no bid"... and then I wish you luck getting on board.

I think I'll take one of those pills myself and see if I feel better in the morning.

See you on Thursday.