So... What's It Going To Be?

Both gold and silver hit their highs of the day about 3:30 p.m. in Hong Kong trading in their Thursday afternoon, and it was pretty much down hill from there. There wasn't much activity worth mentioning in either London or New York trading, and both metals pretty much finished on their lows of the day at the 5:15 p.m. close in New York.

Here's the gold graph. The silver graph is virtually identical.

As for open interest... gold o.i. rose another 3,764 contracts to 478,172 total open interest. Silver o.i. was up only 155 contracts to 125,306. At 3:00 p.m. Eastern time, the new Commitment of Traders report [for positions held at the close of trading on Tuesday, September 15th] comes out. Without a doubt, the numbers will confirm what both Ted and I already know... that the short positions of the bullion banks have blown out to new highs; and in the case of gold, to new record highs. It sure sounds negative, but in a new 6-page commentary to private clients yesterday, Butler had this to say... I remain cautious about assuming that the current negative COT structure must result in a sharp sell-off... but, if there is a sharp sell-off in gold and/or silver, the one and only reason will be because the commercials shorts [the bullion banks - Ed] rigged the price lower and hoodwinked the technical fund longs into selling.

The Comex Delivery Report for Thursday showed that 43 gold and an identical 43 silver contracts were delivered yesterday. Their were no changes reported at either the GLD or SLV ETFs yesterday. Their were minor changes reported by the U.S. Mint, as another 2,000 gold and 100,000 silver eagles were minted. Without a doubt, if production continues at this pace, September will be the lowest month in 2009 for silver eagle production. There are only nine business days left in the month, and to date they've minted only 700,000 silver eagles. The Comex-approved warehouse stocks showed that silver inventories slid a smallish 160,155 ounces.

The usual New York gold commentator had the following to report yesterday... "The rupee is bolstering India's bid to the world market. Efforts to force world gold down will need a great deal of metal. Vietnam local gold stood at a $6.34 discount to world gold of $1,017 early this morning. Mitsui Hong Kong speaks of gold sales from SE Asia as world gold approached $1,023 today. TOCOM is decisively in liquidation mode. On day session volume equivalent to a high 13,005 Comex lots, open interest fell 2.85 tonnes [915 Comex lots] and the public slashed 5.8 tonnes [12%] from their long position."

"Having been conveniently pushed down ahead of the TOCOM open, world gold rose continuously until tempered by the London a.m. fix which, nevertheless, was $1,020.50 -- a new record high. Since then, it was pressured down relentlessly both in US$ and Euros: the US$ Index began firming about 6 a.m. NY time. Estimated volume at 9 a.m. was a pretty heavy 55,140 lots."

"Generally, dealers with exposure to the East seem impressed by the robust nature of the gold market. UBS comments today... Demand seen by UBS for coins and small bars has picked up sharply over the past three days, the first time we have seen such an increase since the first quarter of the year. If this is sustained, it may suggest that the recent rally in gold has more broad-based support than was apparent at the start of the week. We remain tactically negative precious metals, but the short-term bear case is becoming less clear-cut."

"Mitsui London says flatly... With exchange positions at record highs, more and more market commentators are starting to call for a correction in the price. However, scrap flows are nowhere near the levels seen earlier this year when relentless ETF buying was kept in check. Correction in price should see the physical market offer support as the traditions associated with gold are not going to be changed by this rally. Physical buyers simply have to adjust their buying interest to higher levels.

"Reflecting Western opinion, The Gartman Letter expresses nervousness this morning, and has not reinstated the half position sold earlier as had been previously anticipated. Some of gold's friends will be relieved."

"Gold's high US$ price is making some nervous, but with scrap flows restrained [partly because gold in particularly Asian currencies is far from the levels of early this year], still higher prices seem perfectly possible."

There sure wasn't much in the way of gold news yesterday, as I couldn't find a thing worth mentioning at either Kitco or The Mine Web.

But I still have four items for you this morning anyway. The first is story is from The Wall Street Journal. It appears that "The White House will shelve the Bush administration plans to build a missile-defense system in Poland and the Czech Republic, according to people familiar with the matter, a move likely to cheer Moscow and roil the security debate in Europe." This idea was the nuttiest thing imaginable, and I'm glad to see it get the old 'heave-ho' that it so richly deserved. The headline reads "U.S. to Shelve Nuclear-Missile Shield" and the link is here.

The second story is the third one that I've run in the last couple of weeks about big financial problems befalling wealthy Arab families in the oil-rich Middle Eastern countries now that the boom over there has come to an end... and the "greater depression" has begun. This is a much more extensive story on this issue, and it's a bit of a read... and an abnormally long story for Bloomberg to post. The headline reads 'Never Go Bust' Families Mean End of Easy Credit" and the link is here.

The third item is a TV interview of Gerald Celente with Russia Today's Anastasia Churkina which is posted over at youtube.com. It lasts for a little over eleven minutes and is certainly well worth your time, as gold is mentioned during the interview. I thank Mike in Ottawa for sending it along, and the link is here.

And lastly is monthly commentary by Eric Sprott and David Franklin over at Sprott Asset Management in Toronto. In their September Markets at a Glance report, they examine the U.S. debt spiral, and conclude that the U.S. dollar's days as a reserve currency are numbered... if not already over. That is why their firm is so heavily invested in precious metals... "At the end of the day, when the world finally realizes what the US has done to the world reserve currency, international investors will shift into an asset that no government can print. In our opinion the US dollar’s status as a ‘port’ in the financial storm has officially come to an end." I thank Craig McCarty for bringing this story to my attention, and the link to the pdf file is here.

The International Space Station [with space shuttle Endeavour attached] photographed in transit across the sun's disk [sun transit time was 0.8 seconds] as photographed by photographer Thierry Legault in Orleans, France on July 26, 2009.

On every continent, and in every epoch, the peoples who have excelled in creating wealth have been the victims of some of society's greatest brutalities. - George Gilder

So what's it going to be? How will this current situation in both gold and silver resolve itself? If I was betting a dollar, I'd say that the organized crime figures in the bullion banks and the U.S. government will probably win out in the very short-term... but one of these days either world events, or supply and demand will catch up with them... and they'll get buried.

That day can't come soon enough for me, and it's my bet that we're close enough to the end that I'm not going to risk being caught out of position. That's why I'm "all in"... and intend on staying that way for the foreseeable future.

I hope you have a great weekend and I'll see you here on Saturday morning.