Fed Chairman's 1975 Memo Explains Need For Gold Price Management

Gold struggled to gain four bucks from the opening in New York and Sydney in the early hours of Monday morning in the Far East. That tiny gain was for naught, because the moment that Hong Kong opened, it was all downhill into gold's low of the day, which was about 1:30 in Hong Kong's afternoon. From there, and in fits and starts, it rose to its high of the day shortly after noon in New York... which was $997.50 spot. After that, gold ran into some major headwinds, and gave a lot of its gains back...closing about unchanged from it's opening price 24 hours prior.

Silver's path was very similar, except its low occurred on a spike down, just moments after the Sydney close. From there, silver's price chart looks very similar to gold's... running into the same brick wall as gold... and at precisely the same time. However, silver managed to finish the day with a slight gain, and most silver shares reflected that fact.

All in all, it was a pretty quiet day. I was happy to see it turn out that way, because it could have been a lot worse if the Fed and U.S. Treasury et al had wanted it that way.

As far as open interest changes went, the usual New York commentator stated... "Open interest [on Friday] slumped 10,308 lots – 32.06 tonnes, which is considerable." Ted Butler mentioned that silver o.i. fell about 2,200 contracts on Friday as well. These are big numbers, but almost not worth mentioning when you consider the current grotesque size of the short positions in both metals. Needless to say, open interest for Monday's trading day probably showed increases in o.i.... unless there was some short covering involved.

The Comex Delivery Report showed that 94 gold and 10 silver contracts were delivered on Monday. Today is the last delivery day into the September contract for both gold and silver. The next big delivery month is December for both metals. First day notice for October delivery is tomorrow... the last day of September. October is not a big delivery month in either metal. There were no reported changes in either the GLD or SLV. Over in Switzerland at the Zürcher Kantonalbank, their weekly update for their gold and silver ETFs were as follows... their gold ETF was up a very tiny 3,350 ounces, while their silver ETF actually declined 25,559 ounces. That's the first weekly decline that they've had in silver in the four or five months that I've been reporting these numbers. And, once again, I thank Carl Loeb for providing them. The U.S. Mint had another eagles update yesterday. In gold it was 7,000... and in silver they stamped out another 303,000. Totals for the month so far... 106,500 in gold, which is about average for the year. In silver the total is now 1,603,000, which is way below average. That might be their last report for the month, as there are only two days left in September. And lastly, over at the Comex-approved warehouses... 220,052 ounces were reported taken into inventory.

The usual New York gold commentator had the following to report yesterday... "India’s FX and stock markets were closed today – however most bullion markets in the country were open. Calculating premiums is difficult, but it appears that in the afternoon they were ample for legal imports with world gold at $991.51 – some $5.20 below Friday’s closing level. Since world gold went below $987 during the Indian day, it seems reasonable to conclude the country was a serious bidder to the world gold market today."
"Vietnam local gold stood at a $12.69 premium to world gold of $991.35 early this morning (Friday $7.31/$996.77)."

"World gold was run up some $5 above the NY close ahead of the TOCOM open. However, it went out more than $1 below. Day session volume was equivalent to a pretty heavy 15,885 Comex lots and the active contract closed down 67 yen. Open interest rose 0.7 tonnes (211 Comex) and the "general public" added a startling 5.2 tonnes to their long (up 11.1%). At first sight this might seem odd, especially as world gold’s weakness was accentuated by the surging yen. But it is a fact that the private Japanese specs have a good record in their bottom fishing."

"Today, December gold managed to recover from the early European low of down $4.90 to an intraday high of up $6.40 around noon NY time. Trading then essentially stopped. Estimated volume in the final 90 minutes was only 9,255 lots... 10.3% of the day's low total of 89,790 in more than a quarter of the floor session... and December gold settled up only $2.50 at $994.10. By 4pm, gold had eroded another $2.90. The gold shares did not like this at all."

Well, around the world, the G-20 meeting has been officially labeled a total waste of time. All the news stories that I've read since then have sounded ominous. The world is still on the path to total economic, financial and monetary collapse. And no greater proof of that is needed than a quick look at the Baltic Dry Index. Here's yesterday's graph... and I thank the good folks over at InvestmentTools.com for providing it. No 'green shoots' here, dear reader.

Well, I'm glad that I had a "Special Edition" yesterday... as I have another six stories today. The first [courtesy of the King Report] is written by Gretchen Morgenson, and is from the hallowed pages of The New York Times. On the weekend I ran the story about a ruling of the Kansas Supreme Court and MERS... the Mortgage Electronic Trading System. “MERS is basically an electronic phone book for mortgages,” said Kevin Byers, an expert on mortgage securities and a principal at Parkside Associates, a consulting firm in Atlanta. “To call this electronic registry a creditor in foreclosure and bankruptcy actions is legal pretzel logic, nothing more than an artifice constructed to save time, money and paperwork.” Morgenson picks up the thread on this juicy story and runs with it. The headline reads "Fair Game: The Mortgage Machine Backfires"... and the link is here.

The next story is a GATA release with a preamble by GATA's secretary treasurer, Chris Powell. It's a Bloomberg story and bears the headline "Audit us, and interest rates will rise, Fed warns Congress". This is worth the read, and the link is here.

The following gold-related story is from Peter Brimelow over at marketwatch.com. It bears the headline "Gold down, bugs up"... and the link is here.

The next story, also gold-related, is also a GATA release. In it, Rep. Ron Paul asked the Federal Reserve's general counsel, Scott Alvarez, whether the Fed has ever been involved in the gold market. There's a video clip of the exchange, and the link to the story is here.

The Zero Hedge Internet site has unearthed another U.S. government memorandum from the not-so-distant past expressing the intent of the government to rig the gold price in a nominally free market and detailing the need for [and methods of] doing so. It's a memo written in 1975 by the chairman of the Federal Reserve Board, Arthur Burns. In the zerohedge.com article, a link to a pdf file of the actual document itself is included. The story is headlined "Exclusive Smoking Gun: The Fed on Gold Manipulation", and the link is here.

And lastly comes this piece from the Sunday edition of The Times in London. It's an ugly, brutal story... and I must admit that I was a bit shocked when I read it... as I've been around, I thought I was pretty jaded. It's certainly worth your time and the headline reads "Gold pirates wage a dirty, underground war"... and the link is here.

The same government that requires a taxpaying citizen to document every statement on his tax return, decrees that questioning a welfare applicant demeans and humiliates him. - Ronald Reagan

Well, I'm still waiting to see how this situation resolves itself. Are silver and gold going to blast off to the upside and bury the bullion banks... or is the situation going to resolve itself in the same old way, with a huge bullion bank-orchestrated sell-off? The jury is still out... but the record-breaking short positions in both gold and silver are still largely intact, despite the declines in price [and open interest] we've seen in the last five business days.

Regardless of how it turns out, I still urge you, dear reader, to consider signing up for either Casey's Gold & Resource Report for the giveaway price of $39/year linked here... or CR's flagship publication Casey's International Speculator. True, it's pricey, but it doesn't cost, as it pays for itself many times over every year... at least it has for me. To find out more about it, click here.

I note, as I write this closing paragraph, that neither metal did very much during Far East trading... and the London open looks about the same. Volume for this time of day is pretty decent. There's not much anyone [including yours truly] can do about what's coming... either good or bad... except wait it out.

See you on Wednesday morning.