The Fed Admits to Hiding Gold Swap Arrangements With Foreign Banks

Gold rose about three bucks in early Far East trading yesterday, and then went sideways until shortly after 3:00 p.m. in Hong trading. From there, it was obvious that the New York bullion banks had shown up, as both volume and price action picked up a lot... and by 11:00 a.m. in London trading, gold was up $13 from the New York close. But that was pretty much it for the day, although the price did spike up it its high of the day [$1,020.70 spot] during Comex trading shortly before 9:30 a.m. in New York.

Silver followed a somewhat similar path, but it's high of the day was at the London silver fix... which is 12:00 noon their time... 7:00 a.m. in New York. From there, it got sold off into the New York close... but still managed a respectable gain on the day.

Gold open interest was reported to have risen 4,166 contracts to 467,942. Silver o.i. made a new high for this move, rising a steep 3,073 contracts to 128,074 total open interest. This is a huge number... but it's been bigger in the past.

The Comex Delivery Report for yesterday showed that 55 gold and 14 silver contracts were delivered. There were no reported changes in the either the GLD or SLV yesterday... and the U.S. Mint reported no changes either. But, for the second day in a row, there were big changes reported in silver inventories over at the Comex-approved warehouses. On Monday I reported about 2.8 million ounces of silver had been taken into inventory. Yesterday, the warehouse stocks showed that 3,458,588 ounces were withdrawn, which is a pretty big number. Most of the silver was removed from the Brink's depository. One should rightly wonder what this flurry of activity means.

The usual New York gold commentator had the following remarks yesterday... "Indian ex-duty premiums: AM$4.01, PM$2.89, with world gold at $1,006.90 and 1,015.20. Quite adequate for legal imports. The rupee was strong, closing at $1=R47.955... 0.4% above Friday's close. The stock market closed up 0.87%... a fresh 16-month high. A strong rupee at this point is terrible news for the [gold] Bears."

"Local Vietnam gold stood at a $2.83 premium to world gold of $1,005.50 early this morning...Monday it was $3.34/$1,004.60. Japan was closed."

"Reuters has produced its occasional survey of the Eastern [gold] kilo-bar market. This indicates premiums in Singapore and Hong Kong have risen slightly since last week. Dealers in Mumbai and Jaipur are quoted saying demand yesterday on the dip below $1,000 was good."

"The point here is that when gold passed $1,000 early this year, the main Asian physical markets were unprecedentedly heavy sellers. [Partly this was caused by local currency weakness, meaning domestic gold was a good deal higher than now]. This is definitely not the case now."

"The weekly European Central Bank statement of condition indicates that 'gold and gold receivables' fell by € 53 million [2.48 tonnes], attributed to gold sales by one captive Central Bank. Last week net sales of 2.62 tonnes were reported. Apparently once ECB CB has a modest sales program underway."

"Monday's $5.40 Comex loss saw open interest rise 2,144 lots [6.67 tonnes], on volume of 94,057 lots. Very unwise shorting, it would appear. Although December gold closed up $10.60 on Tuesday to $1,015.50... and at one point was up $17, gold was actually comparatively quiet in NY. Estimated volume by 10AM was 69.7% of the day's 96,316 estimated total... and gold drifted during the latter part of the floor session."

"Silver's Bullish Consensus added a point to 69%, still below September 16th's high of 71%. Barclays remarked this morning that Chinese import statistics indicate that the country was a net importer of silver for the sixth month running: a momentous development, if true. China once played a similar role in silver to that which India has in gold."

"The [gold] Bears now desperately need a huge and aggressive seller such as reversed gold's surge last July. The phone calls must already be in."

There was an interesting story about gold demand in India posted over at the mineweb.com. It's a Reuters piece entitled ."Indian gold purchases pick up as festive season gathers momentum". The story goes on to say "Yesterday when gold fell below $1,000 demand was good and there were lots of inquiries even though we were closed for a religious holiday," said a dealer at a bank in Mumbai. "Any correction below $1,000 will draw good buying. If it falls to $980-$990, there will be very heavy buying," said the dealer, referring to levels seen earlier this month. The entire story is linked here.

I see in a report from the Association of American Railroads [courtesy of the King Report] that August freight rail traffic in both the United States and Canada was pretty bad... U.S. freight rail traffic was down 16.4% [carloads], with intermodal rail traffic down 16.7% from 2008. In Canada, the numbers were even worse, with freight traffic down 20.5% [carloads] and intermodal traffic down 18.3% from August 2008.

I have four other stories for you today. The first one is real estate related and is a story that was posted over at Reuters. The headline reads "U.S. mortgage delinquencies set record". This sort of headline should now be no surprise to you by now, dear reader. As I've said many times before... call me in 2013 and we'll talk about the bottom of the U.S. real estate market. "The rate of subprime mortgage delinquencies now tops 41%, up from about 39% in each of the prior five months... and August bankruptcy filings were up 32% from a year earlier, compared with a 35% year-over-year increase in July." It's not a long story, and it's worth your while. I thank Casey Research's John Grandits for sending it along... and the link is here.

In another Reuters story yesterday was this piece by their foreign exchange analyst, Neal Kimberley. In it, he speaks of a new type of Plaza Accord... an agreement to depreciate the U.S. dollar against all other currencies. This new attempt will try to ensure that the fall in the U.S. dollar is less dramatic that it was when the original Plaza Accord was announced 24 years ago. However, running stories like this in advance of the fact, doesn't seem to me to be the best way to go about it. The headline reads "Global rebalancing to weaken dollar, quietly." and the link is here.

In commentary posted yesterday, silver market analyst Ted Butler conveys a statement from U.S. Commodity Futures Trading Commission member Bart Chilton, providing an update on the CFTC's ongoing investigation of manipulation of the silver market. Butler construes Chilton's statement as a warning to the big silver shorts. Butler's commentary is headlined "Silver Investigation Update" and is a must read... and you can find it linked here.

As the title at the top of my commentary states, today's top story is a surprise admission by the Fed that it has gold swap arrangements with foreign banks that it does not want the public to know about. The Fed's disclosure, which came this week in a letter to GATA's Washington-area lawyer, contradicts denials provided by the Fed to GATA in 2001... and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly... and the currency markets generally. At the time, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. The GATA dispatch that carries this story has a lot of links to various other documentation that proves that the Fed, plus other central banks, conspire to rig gold [and silver] prices. The link is here.

The idea that political freedom can be preserved in the absence of economic freedom, and vice versa, is an illusion. Political freedom is the corollary of economic freedom. - Ludwig von Mises

As I write this closing paragraph, Sydney is already closed for the day... and London is already well into Wednesday morning trading at 10:00 a.m. local time... 5:00 a.m. on the U.S. east coast. So far the gold price has been vacillating on either side of $1,015... and silver hasn't done much either. Volume is light in both metals... not like yesterday at this time when volume was already substantial, and prices were on the rise. With the FOMC meeting, $112 billion of Treasury paper being 'auctioned' as I write this... and the G20 meeting this weekend... who knows what's going to happen in the near term.

Now we wait and see what the Fed and the Treasury have in store for us in the days ahead. Because, as the Fed has just confirmed to GATA, they're running the gold show.

See you on Thursday.