Up, Up and Away???

After gold's [and silver's] little run-up in price during early morning trading in Hong Kong yesterday morning, neither metal did much of anything until the London a.m. gold fix was in at 10:30 a.m. in London [5:30 a.m. in New York]. Then the rally that everyone was waiting for, began. Both metals rose right up until the close of trading in London [11:00 a.m. New York time], and then their respective prices made the usual turn to the right and softened slightly. There was a rally in electronic trading about 3:00 p.m., but it failed to reach the previous high set earlier in the day.

Silver was the big star of the day, up 4.33% against gold's up 2.42%. The HUI shone... up 7.00%. There were lots of happy smiling faces yesterday... including this writer.

But volume in both metals was monstrous. Ted Butler mentioned something about 185,000 contracts in gold were traded yesterday. I'm sure silver's trading activity was similar. This rally is not going unopposed. The bullion banks are going short against all comers in this rally so far. If they hadn't shown up... or were covering their short positions instead, the charts would have showed pretty much a vertical line pointing to the heavens. I hate to say it, but 'da boyz' are still there.

lemetropolecafe.com had these comments about open interest for Monday's trading... "The gold open interest ROSE 7,385 contracts yesterday, which means the late surge was new buying and not Gold Cartel short covering. It tells me we are in the midst of a Commercial Signal Failure in which the shorts trading with the cabal are going to be forced to cover in the weeks ahead, which will add fuel to the gold fire. Silver open interest went up a scant 359 contracts to 126,917, which further suggests the gold buyers were so active because they knew the currency story was going to hit the tape today."

The Comex reported 16 gold contracts will be delivered today... and it appears that since the CME took over, they've stopped reporting silver deliveries. Maybe they've hidden them in some other report. I will see what I can find out. Over at the GLD ETF, another 78,467 ounces were added... and, of course, there were no changes at the SLV ETF. Ted Butler feels that the SLV is now owed well north of 30 million ounces. There were no changes reported by the U.S. Mint yesterday, and the Comex-approved warehouses showed that a smallish 73,032 ounces were reported taken into inventory.

The usual New York gold commentator had the following to report yesterday... "India was a huge importer. The rupee decided to surge today, notwithstanding a modest 0.55% rise in the stock market. It closed at a 4-month high of $1=R46.89 [Monday-R47.525] This is horrible news for the [gold] Bears."

"Vietnam gold on Tuesday morning stood at a $3.09 premium to world gold of $1,016.00... which is rather a robust response to a sizable gold move. TOCOM sold, but perhaps not as aggressively as might have been expected. Of course, the strength of the yen has drained much excitement from yen gold, which is lower than in mid-September."
"Interestingly, the first wave of buying coincided with the publication of The Gartman Letter, which added a $US gold "unit" to its existing FX gold units. It did so in part because of the attitudes implicit in a story in the UK Independent newspaper, reporting multinational discussions to replace the $US in oil transactions. [I ran that story in my column yesterday - Ed] However, TGL also discusses at some length various aspects of the Iranian situation, which it sees heating up. Overall, it may well be that this well-connected party has been told something."

"The effect of yesterday’s action was to turn up The Privateer’s US$ gold 5x3 point and figure chart, now looking quite handsome and threatening a major breakout. Click here."

"With the world’s largest gold buyer still keeping pace, this move could become really serious."

As I mentioned in my commentary yesterday morning, it sure didn't take long for that story from The Independent in London to have an impact. Of course, all participants are denying it in unison, so it obviously must be true. Here's one of many stories of denial. This one's from Bloomberg headlined "Saudi Central Bank Backs Dollar, Cites Its 'Convenience'" [Right!!!]... and the link is here.

Not to be outdone by all this, comes this Ambrose Evan's-Pritchard piece from The Telegraph in London. E-P says that "You can date the end of dollar hegemony from China's decision last month to sell its first batch of sovereign bonds in Chinese yuan to foreigners... it is this shift in China and other parts of rising Asia and Latin America that threatens dollar domination, not the pricing of oil contracts." His article is entitled "China calls time on dollar hegemony"... and the link is here.

A country that the world has forgotten about recently is Iceland. It's still there... firmly astride the mid-Atlantic Ridge in the North Atlantic Ocean... and it's still on the dole. Here's a Financial Times story that was filed from Reykjavik. I thank Florida reader, Charles Dubelier, for sending it along. The headline reads "Iceland criticizes IMF, UK and Dutch"... and the link is here.

The next story is ripped from a GATA dispatch from yesterday afternoon. Zero Hedge's researcher, Geoffrey Batt, has just posted two declassified Carter administration documents showing that the world's trading oil in something other than dollars, has long been a serious worry of the U.S. government. The Zero Hedge posting is headlined "Confidential Memos Indicate Oil SDR Pricing Shift Would Be 'Most Damaging' To United States And Precipitate 'Serious Market Reaction'" and the link is here.

And lastly is a GATA dispatch entitled "Ohmigod! Commodity investors might have to buy... actual commodities!" The Financial Times story to which this headline refers is imbedded in the preamble... which is also a must read in and of itself. GATA secretary treasurer, Chris Powell, also links a 2001 essay by Peter Warburton... and if you don't have time to Warburton's entire essay, you must read the first three paragraphs under the sub-heading "Central banks are engaged in a desperate battle on two fronts". If you want to understand 'Gold/Silver Price Management 101' in a nutshell... Powell's preamble and Warburton's 'three famous paragraphs' are all you really need to know to have a complete grasp of the current situation... and why the bullion banks are doing what they're doing. The link is here.

Government is essentially the negation of liberty. - Ludwig von Mises

If the kind of action we had on the Comex yesterday is any indication of what's in store for the future, things are going to get pretty wild from hereon in. Although both metals were up nicely, it was all very orderly... and the bullion banks piled on the short positions against all the longs placed on both Monday and Tuesday... so from that aspect, nothing has changed. But, will the bullion banks get over run? Beats me. But the first sign of it will be a runaway price to the upside in a disorderly market as the shorts begin to cover... or withdraw from the market entirely.

Of course I'd be delighted with that scenario, as it couldn't happen to a nicer bunch of crooks. But the other option is still out there... "in your ear" at some unknown point in the future.

But, for the moment, I'm just going to pour myself a glass of wine and enjoy the ride... and hope it lasts for a long time. Fingers crossed!

And, as I write this last paragraph, I note that trading was pretty dull in the Far East earlier today. London has been open for about an hour already and both gold and silver are heading north... as the U.S. dollar heads south. It should be another interesting day in New York once again.

See you on Thursday.