Russia's Central Bank Adds Another 300,000 Ounces of Gold in August

Gold lost about five bucks during trading in the Far East on Friday. There was a bit of a rally from the London low until the high of the day at the London p.m. gold fix at 10:00 a.m. in New York. The price at the high was $1,018.70 spot, and it was obvious that it was heading back over $1,020. Then, once the 'fix' [literally] was in, gold 'lost' $10 in half an hour... recovered a little, only to drift lower and basically close on its low of the day.

Silver drifted lower starting from its high of the day at the opening of Hong Kong trading on Friday morning... and by the time the trading was over in New York, silver was down about 25 cents, closing almost on its lows of the day.

The gold and silver shares lost a little more ground again yesterday.

Changes in open interest are not as readily available now that this information is put out by the CME instead of the Comex. It has to be computed by hand, which is ridiculous. According to my friend Bill Murphy over at lemetropolecafe.com, Thursday gold o.i. fell 7,338 contracts to 470,834 contracts. Silver o.i. also fell, this time by 928 contracts to 124,387.

The Comex Delivery Report for Friday showed that 59 gold and 27 silver contracts were delivered. It should be no surprise to anyone that neither the GLD or SLV ETFs showed any changes yesterday, even though they're both owed a king's ransom in physical metal.
Ted Butler has more to say about that below. There were no reported changes from the U.S. Mint... but over at the Comex-approved depositories, another 811,339 ounces of silver were withdrawn from inventories.

As for the Commitment of Traders... it was awful. In silver, '4 or less' bullion banks are now net short a monstrous 61,926 contracts! [And if the truth were known, these four traders are short way more than that.] These contracts represents 309.6 million ounces of silver... a hair under 50% of this year's world mining production in silver. The link to the full-colour COT chart for silver should give you the horrors, and the link is here.

In gold, it's just as bad, if not worse... and it certainly set a new record high net short position of 284,661 contracts, which is 28.5 million ounces of gold. This number should scare the bejesus out of you! The link to the equally ugly full-colour COT graph for gold is here.

I note that Ted Butler did his weekly interview with Eric King over at kingworldnews.com. He reports that the commercial short and speculative long positions in gold and silver have again reached record extremes. Butler also speculates that the silver exchange-traded fund [SLV] is being shorted by commodity exchange shorts, creating an explosively dangerous as well as fraudulent situation in the silver market. This is a must listen... and the link is here.

The usual New York gold commentator had the following for us yesterday... "An interesting story from India today indicates [that] scrap totals are falling below expectations: "The sales of used gold, know as scrap gold in commodity parlance, have declined by almost 50% despite prices of the yellow metal hitting a record high in the local market. Normally, jewellery retailers collect 25-30 grams of used gold against the sale of every 100 grams. However, the recovery of scrap intensifies in case the prices of the precious metal head north. But this time, in spite of gold hitting a record high, scrap recovery by jewellers has declined to 12-15 grams. This indicates that consumers are holding on to the precious metal in anticipation of much higher prices in the future," said Ashok Minawala, an industry veteran." [The story is linked here. - Ed]

"This story also reports the Bombay Bullion Association is estimating September gold imports at 20 tonnes. This seems early in the month to be expressing an opinion: but it is conspicuously not zero."

"Local Vietnam gold stood at a $1.29 premium to world gold of $1,012.20 early this morning... [Thursday - Discount $6.34]. TOCOM open interest continued to shrink. On day session volume equivalent to 8,531 Comex lots, it declined 1.41 tonnes [452 Comex lots]: the public shaved another 0.5 tonnes from their long after the 12% cut yesterday. Japan will now be closed until Thursday."

"UBS today notes that IMF consideration of their newly-authorized gold sale is scheduled for next week, and rather hopefully suggest that failure to find a large Central Bank counter party - as some [notably UBS] have been predicting - might disappoint the market. This is dubious. Reuters this morning presented a collection of bearish remarks entitled "Analysis -- Gold reaches for history; does the rally add up?" [The link is here. - Ed]

"Today, having traded sideways all day, gold tried a rally on the Comex open to a December gold high of up $11.50 [10 a.m. estimated volume a moderately heavy 53,773 lots], which ran into aggressive selling... conveniently after the [London] PM fix of $1,012 the ounce."

"While India... and also the Muslim world... may be disrupted by public holidays on Monday, experience suggests that in India at least, price overrides most holidays. The bears may find themselves surprised."

In another gold story that I lifted from Bill Murphy's MIDAS commentary over at lemetropolecafe.com come this headline in a story posted at economictimes.indiatimes.com... "Gold buyers flocking to market despite high prices". The link is here.

Eric King of King World News also was kind enough to interview your humble scribe yesterday as well. We discussed the International Monetary Fund's latest mouthings about selling gold it may not really have, the dangerous desperation of the gold cartel, the failure of the gold mining industry to replace reserves, and Barrick Gold's latest plan to close some of its hedges and acquire other mining companies. The link is here.

I also note that The Central Bank of the Russian Federation updated its website for August yesterday. In doing so, they showed that they have increased their gold holdings by another 300,000 ounces from the previous month. So far in 2009, they have purchased 1.9 million ounces. Their gold reserves now total 18.6 million fine troy ounces. The graphs below, courtesy of Richard Nachbar, tell all. Richard Nachbar is a rare coin dealer in upstate New York, whose website is linked here.

Along with all the stories and interviews above, I also have four other stories that are more than worth your while. If you can find the time, I urge you, dear reader, to read them all.

The first is from my friend Aaron Krowne, the proprietor of BankImplode.com. The title of the essay reads "Exclusive - Wells Fargo's Commercial Portfolio is a ticking time bomb"... "Not only do the bank’s outstanding commercial loans collectively exceed the property values to which they are attached, but derivative trades leftover from its acquisition of Wachovia are creating another set of problems for the already beleaguered San Francisco-based megabank." The link is here.

Posted over at the European website of leap2020.eu is a piece entitled "Global Systemic Crisis: In Pursuit of the Impossible Recovery". This is a short, stark, and unvarnished reading of the world's condition as of right now. There are some excellent graphs... and the whole article is worth your while. I thank reader Doug Beiers for bringing it to my attention, and the link is here.

The talk of the town yesterday was the following news item about IMF gold sales... which was mentioned several times earlier in this report. The yahoo.com story is headlined "IMF approves sale of some its gold". "China, India and Russia have indicated interest in such purchases as a way of reducing their position in dollar-denominated securities and increasing their role in IMF operations. These countries and other developing nations have complained [that] the IMF is dominated by the United States, its largest shareholder, and European nations." The link is here.

And for the last story, dear reader, we head back into the times of the Roman Empire. It's an absolutely fascinating read... and a must read at that! This is a transcript of a speech given by Professor Joseph Peden way back on October 27, 1984. But that matters not. So I urge you to blow the froth off a cold one and give this article your undivided attention. It's a story posted at mises.org, and the title reads "Inflation and the Fall of the Roman Empire". You'll be forgiven if you find a lot of eerie parallels to today's situation. I thank the "Charleston Voice" for bringing it to my attention... and the link is here.

Government enterprise is an oxymoron. The words 'government' and 'enterprise' should never be used in the same sentence. - Gregory Bresiger

Today's 'blast from the past' needs no introduction whatsoever. According to wikipedia.org, the composer of this piece, Scott Joplin, was born between July 1867 and January 1868... and died on April 1, 1917. Joplin was an African-American composer and pianist, born near Texarkana, Texas into the first post-slavery generation. He achieved fame for his unique ragtime compositions, and was dubbed the "King of Ragtime." During his brief career, he wrote forty-four original ragtime pieces, one ragtime ballet, and two operas. One of his first pieces, the "Maple Leaf Rag", became ragtime's first and most influential hit, and remained so for a century.

Ragtime music is syncopated, meaning that the right and left hands are playing different tempos/times throughout the whole piece. I spent seven years taking classical piano lessons... which is almost no help when it comes to playing this kind of music. You have to be gifted at birth to be able to play ragtime as well as the unknown gentleman who plays in this youtube.com video which is linked here.

Closing comments? Well... I've got a few: 1] Bullion banks' net short position in gold and silver are heading for the moon, 2] The G20 is meeting in Pittsburg this weekend, 3] The U.S. Treasury has got $112 billion in new paper to sell this coming week, 4] The IMF sounds like it's going to sell all 403.3 tonnes of gold next week, 5] Options expiry for the October gold and silver contract is on Wednesday, 6] gold, silver, the HUI/XAU and the DOW are all in overbought territory, and the US$ is in oversold territory, and lastly... India, Japan, and much of the Muslim world have holidays on Monday.

So most of Monday's trading will involve only the New York bullion banks, as no one else is open except London... and the New York banks can trade there as well through the Globex system.

Am I nervous? You bet! But I'm still "all in".

Enjoy the rest of your weekend and I'll see you on Tuesday morning.