Still Waiting For a Resolution...

Gold opened at $1052.80 in early Far East trading on Monday morning... and never got more than three or four bucks either side of that price until the London p.m. gold fix at 3:00 p.m. in London... 10:00 a.m. in New York. The London fix was also the low of the day at $1,047.10 spot. From there, away it [and silver] went.

Silver's price action on Monday was similar. The only major difference was that silver's low of the day was at the Hong Kong open rather than the London gold fix.

For a change, both metals closed virtually on their highs of the day. I was underwhelmed with the share price action.

Open interest for gold on Friday showed another increase, this time by 3,327 contracts to 514,718. Volume was decent at 125,365 contracts. Silver o.i. was up a smallish 311 contracts on volume of 30,807 lots. Total silver open interest is now 136,387 contracts. Unless yesterday's rally was short covering... which I doubt, I expect open interest to have risen yesterday as well.

It was a slow delivery day on Monday. The CME Delivery Report showed that only 8 gold contracts are to be delivered on Wednesday. There were no reported deliveries in silver. Neither the GLD or SLV ETFs reported any changes yesterday. Over at the Zürcher Kantonalbank in Switzerland there were minor declines in both the gold and silver ETFs for the week that ended 16 October 2009. In gold, there was a drop of 7,824 ounces... and in silver the decline was only 29,089 ounces. I thank Carl Loeb for those numbers. The U.S. mint started off the week with an increase of 7,500 gold and 108,000 silver eagles. Month-to-date mintings stand at 63,500 in gold and 1,525,000 in silver. And over at the Comex-approved warehouses, silver inventory declined 275,906 ounces.

Nick Laird over at sharelynx.com was kind enough to provide the following graph of Comex depository warehouse silver stocks. This particular graph goes back to 1970... 39 years ago. Note the price graph at the top. Except for the big excitement back in 1979/80... and the price rise of the last four years... the silver price has remained almost ruler flat. I challenge any of my readers to come up with a 40-year chart of any other commodity that even remotely looks like this one. This is what a long-term price management scheme looks like.

You will also note that the inventory [starting in 2001] is divided into two categories... eligible and registered. The differences between the two is a class of ownership. The registered category is silver that's currently for sale... and the eligible category is silver that's not currently for sale. [I know that sounds counterintuitive considering what the words eligible and registered mean... but those are the facts] The category can be changed by the owner [from one category to another] with a phone call and few key strokes on a computer. And every single solitary ounce of that silver sitting in the four Comex depositories is owned by someone... whether it's currently being offered for sale, or not.

The usual New York gold commentator had the following to report yesterday... "Mumbai, the financial capital of India, was closed today, and although other cities and their gold markets were open."

"However, Reuters has produced its periodic update of Eastern kilo-bar premiums, which have hardly moved in a week... Singapore 60c, Hong Kong 20c, Tokyo [$1]. Considering world gold exceeded $1,070 on Wednesday - which must have brought out scrap - this is reasonably healthy." [The Reuters story is linked here.]

"Reuters also carried an interview with a Gulf gold refiner, claiming that scrap supplies are abundant: We have noticed a big increase in scrap gold coming in from India and Pakistan. Because of the high price of gold, more people are selling to make a profit at this point. said Mohamed Shakrachi, managing director of Dubai-based Emirates Gold, one of the largest gold refineries in the Middle East∑ With a weak rupee I'm expecting that scrap will really flood the Middle East this year. Everyone seems to be selling their gold jewellery these days. he said.

"On Monday morning, Vietnam local gold stood at a $16.58 premium to world gold of $1,050.89. This morning [Tuesday] local Vietnam gold stood at $17.29... with world gold at $1,062.50. This is the third day of double-digit premiums." TOCOM was non-committal... and the public cut another 0.5 tonnes from their already very small long... to 13.6 tonnes."

"UBS has reluctantly raised its gold price targets: Physical demand for gold from jewellery clients, although generally light over the past six weeks, has been seen in good strength on corrections in the price -- Indian purchases of gold were, for instance, extremely strong on Sept. 25, when gold dipped below $1,000/oz to a recent low of $986/oz. In light of the evidence from the physical gold market, we have decided to -- somewhat grudgingly -- increase our short-term forecast for gold... We now see gold at $1,000/oz in one month [from $950/oz previously] and $1,050/oz in three months [from $1,000/oz]..." [Well, guys... don't stick your necks out too far! - Ed]

"From the point of view of gold's friends, Bloomberg today posted a pleasant story assembling various ultra-bullish judgments... John Williams, an economist and the editor of Berkeley, California-based shadowstats.com... said... If the methodologies of measuring inflation in 1980 had been kept intact, gold would have to hit $7,150 to be the equivalent of the 1980 record. At Jersey, Channel Islands-based goldmoney.com, which held $759 million of gold and silver for investors as of Sept. 30, founder James Turk said... The dollar is constantly being debased and inflated, Turk said. By 2013, gold is going to be at $8,000 and the Dow will be at 8,000."

The "pleasant story" from Bloomberg that the New York commentator mentioned above was one that had been sent to me by a reader earlier in the day. It's full of happy news, but they also interviewed gold 'analysts?' from the 'dark side of the force' as well. It's still well worth the read. The story is headlined "Gold at $2,000 Becomes Inflation-Adjusted Bulls for '80 High"... and the link is here.

There was gold story out of Canada today. This one from the CBC... the Canadian Broadcasting Corporation. The headline reads "Gold Fever Returns"... and the link is here.

The next gold-related story is from Peter Brimelow over at marketwatch.com. The headline reads "Gold bears gathering, but gold bulls defiant" and the link is here.

Then there was this gold story [courtesy of lemetropolecafe.com] from The Telegraph out of London. I notice that the dateline is from ten days ago, but the contents of the story are valid nevertheless. The piece is entitled "Gold price 'set to double in four years'"... and the link is here.

Here's another story from the Canadian side of the border. Trace Mayer, proprietor of RunToGold.com, was interviewed for six minutes on October 9th by Michael Hainsworth on Business News Network in Canada and discussed at length the central bank gold price suppression scheme, which Mayer said was characterized by the "Greenspan call," which now is being offset by the "Beijing put." Mayer did an excellent job in getting the purposes of the scheme across in a brief time, just as Hainsworth's questions signified that he understood the gold issue thoroughly. You'll probably never see anything like this exchange on U.S. television, so U.S. citizens will just have to be thankful that there's a free press next door. You can watch the BNN interview linked here.

In today's last gold story, MineWeb's Lawrence Williams takes note of the growing belief that institutions may not have all the gold they claim to have and that the world's gold supply is substantially oversubscribed. Williams cites GATA's work and notes that institutional gold holders are just too secretive about the metal. His commentary is headlined "Is Your Gold Really There?" and you can find the link here.

The following story appeared in several publications over the weekend... enough of them that I finally decided to run this version of it. Considering what has happened [at least once] to all South and Central American currencies in the last 50 years, I think that the prospects for this new regional currency is hopeless unless backed by gold. However, it's just another sign that the U.S. dollar is being rejected world wide. The story comes from aljazeera.net and is headlined "Bolivia summit adopts new currency". I thank u.doran for sending it along and the link is here.

And lastly comes this rather big read [8 pages] from Matt Taibbi over at rollingstone.com. He's been on a verbal rampage against the "Money Trusts" for quite a while now, and this rant is no exception. In his usual pithy prose, I'll use the following quote to give you a flavour of the contents... "To the rest of the world, the brazenness of the theft ˜ coupled with the conspicuousness of the government's inaction ˜ clearly demonstrates that the American capital markets are a crime in progress. To those of us who actually live here, however, the news is even worse. We're in a place we haven't been since the Depression: Our economy is so completely f--ked, [that] the rich are running out of things to steal." The title of the essay reads "Wall Street's Naked Swindle"... and I thank Donna from Florida for sending it along. Refill your coffee... and then click here.

What 10 years ago was a cheap stock-fraud scheme for second-rate grifters in Brooklyn has become a major profit center for Wall Street. Our burglar class now rules the national economy. And no one is trying to stop them. - Matt Taibbi, rollingstone.com - October 15, 2009

Yesterday I spent some serious time with my stock broker of 25+ years. I asked him what he saw from where he sat. He said that a lot of his clients our age [that's 60+] have lost a bundle in the stock market and can't retire on what's left because interest rates are so low that the yearly income from any fixed-rate investment is many orders of magnitude less than what they're making now. I would say that applies to an unusually large portion of the leading edge of the 'baby boomers'... of which I'm one. He went on to say that the entire global economic, financial and monetary system has been "Photoshopped" just to keep up the appearance that everything is fine. I guess that's his way of saying that everything is rigged... and you can't believe anything you see anymore. He would be right about that.

As for the precious metals... they had a good day yesterday... but I was extremely unhappy with the performance of the shares, which should have done much better than they did... especially when the general equity markets did so well. Does it mean anything? Who knows... but it makes me nervous nevertheless. Time will tell.

I would guess that we'll see another record high short position in gold when the open interest figures for Monday become available. Nothing has changed, as nothing has been resolved. So we wait.

See you on Wednesday.