Russia To Sell 45 Tonnes of Gold?

wouldn't read a thing into Thursday's 'activity' in either gold or silver. It was just another day off the calendar with nothing resolved... up or down. The highs... if you wish to dignify them with that name... in both metals occurred in morning trading in Hong Kong. There was an intermediate low in gold and silver at the London a.m. gold fix at 5:30 a.m. New York time, an intermediate top at the Comex open... and from there they got sold down to their respective lows of the day at the London p.m. gold fix at 10:00 a.m. New York time. Another intermediate high was the London close at 11:00 a.m. in New York. And from there they got sold off until half past east coast lunchtime, before rising into the New York close at 5:15 p.m. It was a lot of churning... and not much else. The silver chart shows Thursday's price activity the best.

In yesterday's commentary I was able to provide the preliminary open interest figures for Wednesday. Well, the final numbers from the CME for Wednesday look almost identical to the preliminary numbers. Gold o.i. rose a hefty 16,484 contracts on pretty big volume of 158,527 contracts. The new total gold o.i. is now 516,832 contracts. Not a record... but a huge number nonetheless. In silver, Wednesday's silver open interest rose a big chunk as well... up 2,664 contracts on smallish volume of 31,426 contracts. Total open interest in silver is a huge 137,437 contracts. The latest update to the Commitment of Traders report will be released at 3:30 p.m. Eastern time today.

Three hours after writing that last paragraph, the preliminary open interest numbers for Thursday are now available. Gold open interest fell 10,134 contracts to 506,698 contracts on estimated volume of close to 115,000 contracts. Silver o.i. fell 1,674 contracts to 135,763 total open interest. Volume was a bit over 33,000 contracts.

The CME reported that 89 gold contracts are scheduled for delivery on Monday... nothing reported for silver. Neither the GLD nor the SLV showed any changes in their alleged holdings yesterday... and there was no report from the U.S. Mint either. But over at the Comex-approved depositories, another 524,833 ounces of silver were reported withdrawn. Most of that came from Brink's.

The usual New York gold commentator had a couple of reports yesterday... "India was not an importer yesterday. Bloomberg carried a more normal Indian dealer report, with the head of the Bombay Bullion Association bemoaning the effect of recent prices on demand." [The link to the story is here.]

"However, the story does say that the BBA thinks September imports were 50 tonnes, down only 4 tonnes from the previous year. By comparison, thebulliondesk.com has a Dow Jones story reporting that... China imported 112 metric tons of gold in 2008, an executive at China Minsheng Banking Corp. said Thursday. A rise in net imports was driven by 176% grown in investment demand for the yellow metal, which hit 68 tons, and 21% growth in jewelry demand to 326 tons, said Lila Luk, the Beijing-based head of precious metals at China Minsheng Bank."

"What this demonstrates is that, partly because of India's virtually complete lack of domestic gold production, China is comparatively a bit player on the global gold market."

"TOCOM was a tentative buyer today... as the public added 1.3 tonnes to its long."

"Wednesday's powerful New York rally [and equally dramatic aftermarket slump] saw open interest jump 16,484 lots... 51.3 tonnes. Standard Bank today [Thursday] pointedly says... The rally in precious metals yesterday was met with strong resistance, which we believe remains in place." [They would be right about that! - Ed]

"Yesterday Mitsui-London reported that there was "plenty of talk" about "option-related barriers" at $1,075. The daily chart clearly indicates opposition above $1,050."

"Thebulliondesk.com carried a couple of reports to the effect that the Russian state agency Gokhran is about to sell 45 tonnes of gold in London before the end of the month. This is said to be the first large sale since the Soviet era. Since source names is Interfax, the report has to be taken seriously. Nevertheless, it is odd. The Russians, above all others, were always expertly secretive about their activities. And, of course, the central bank has appeared to be building gold reserves lately. [2.3 million ounces so far this year. - Ed] Thebulliondesk report concludes interestingly: Speculation this month has been rife on the possibility of official sector or central bank activity in the gold market... On the October 9th London afternoon fix, an unusually large volume of around 800 bars... or 10 tonnes was purchased."

"Barclays has come up with an intelligent thought on Turkey: Reuters has cited the Turkish Jewellery Association saying Turkey's gold imports for 2009 were likely to be between 75 and 80 tonnes... rising to 150-180 tonnes in 2010. The data from the Istanbul Gold Exchange shows that Turkey has imported 33 tonnes for the year to September, implying it would need to import around 14 tonnes each month during the last quarter... this is equivalent to the highest monthly tonnage seen this year in July."

"Turkish kilo bar premiums appear to be running $3-4 at present, which certainly suggests an off-take acceleration. This is important: in good years this decade, the country took in well over 200 tonnes [twice as much as China]. The economy and currency are making a brisk recover from the shambles of late last year. Turkey will bear watching."

"This [Friday] morning, Vietnam local gold stood at a $17.37 premium to world gold of $1,059,80."

The mineweb.com story about Russian gold sales that the usual New York gold commentator spoke of above, is restricted to subscribers only. Fortunately, the story was posted in its entirety over at lemetropolecafe.com yesterday afternoon, and I've cut and paste a chunk of it below.

TheBullionDesk.com
Russia could sell 45t from gold reserves by end of month - source

London, 22 October 2009 -- A large consignment of gold to be sold into the loco London market by a state-backed Russian body, as reported earlier today, could top 45 tonnes and may take place by the end of this month, a Russian expert said.

The government agency for precious metals and minerals, Gokhran, intends to sell its first large shipment of gold since the Soviet era, Russian news agency Interfax reported today.

The sale would take place via state-owned export trading company Almazjuvelir, based in Moscow, on the London fix, Interfax reported, citing an unnamed source.

The news surprised Russia watchers in the London bullion market - the move would run counter to a trend by Russia's central bank over the past two years to increase its purchases of gold.

In September, the central bank of the Russian Federation added 12.9 tonnes to its gold reserves, bringing its total gold purchases for this year to more than 70 tonnes and eclipsing the whole of its purchases for 2008, which stood at 69 tonnes.

But the central bank and Gokhran operate independently, several sources said, raising the credibility of the story.

"It's possible. Gokhran holds gold, platinum and possibly silver. It goes back to the dark old murky days when Russia used to hide inventories from the market," one trader said. "The two big questions are: who has said it - does he have authority - and what is ‘big’?"

The story appears to be backed up by evidence in Russia's draft budget for 2010-2012, released earlier this month.

A Russian expert, who declined to be named, said via email: "You have to remember that the Byzantine Empire often employs a well-organised planned approach to commercial activities. Gold is generically viewed there as an asset of the last resort - not a particularly desired one that has to be flogged off as soon as possible."

Gokhran (or Go-Hran) is effectively a depository that keeps the metal and then sells it if and when it is ordered to do so by the Finance Ministry (MinFin), the source said. END

Besides all of the above, I have four stories for your reading pleasure today. The first is a very short item over at zerohedge.com It appears that the U.S. Treasury is going to be creating another $182 billion out of thin air with its auctions next week. Will the debt ceiling be breached when that happens? Read all about it here.

The next story, which is currently posted over at mineweb.com, is a gold-related story headlined "In India even the Post Office sells gold coins"... and the link is here.

The next story is from Eric Sprott and David Franklin of Sprott Asset Management LP of Toronto. This is their September commentary entitled "Safe Harbour No More". To tell you truth, I can't remember whether I've run this story before or not. It seems vaguely familiar. Anyway, it's only three pages long... so even if I have run it before, it's still worth one more look... and the link to the pdf file is here.

And lastly is market commentary by silver analyst Ted Butler that's currently posted over at investmentrarities.com. It's been a while since I've posted any of his work, because he now has a subscription service. However, this short piece escaped yesterday. It's his commentary on the Bank Participation Report that was released earlier this month. I spent some time on it myself... but here is the real expert on the subject. The title reads "Outrageous"... and the link is here.

It's 2:00 a.m. Eastern time as I write this paragraph... and I note that both gold and silver are up a tad in Hong Kong afternoon trading at the moment. Volume is decent for this time of day, so it's not just the local traders in the market at the moment.

As I mentioned in my opening paragraph, nothing has been resolved. Here's the current 3-year gold chart to put the last couple of weeks of go-nowhere trading activity into perspective. Right now the bullion banks are still sitting on a near-record short position in gold. It remains to be see whether we get a short, sharp [and possibly ugly] correction before we power higher... or are we going to blast off from here? Those are about the only two ways out of this.

Either way, you have to be invested in solid well-researched precious metals companies to ride the gold and silver rocket. The cheapest way to find out which ones to invest in, is to shell out US$39 and get a one-year subscription to Casey's Gold and Resource Report . Included, is CR's unconditional money back guarantee that's good for 90 days. You just can't lose on an offer like that. I seriously urge you to make the investment.

I hope you have a wonderful weekend and I'll see you here again tomorrow.