Gold Is The Talk of Planet Earth Right Now

Well, trading in both gold and silver started off in the right direction when the Far East opened for business on Monday morning. The precious metals prices pretty much mirrored the swooning dollar. The top price in both metals was minutes before 8:00 a.m. New York time... and before trading began on the Comex. The dollar 'bottomed' an hour later.

From their respective highs, the selling pressure began on both metals... and slowly but surely the nice gains got whittled away...especially in silver. As I write this particular paragraph, it's been 13 hours since the dollar bottomed, and although the dollar has gained an insignificant 10 basis points since then, both metals have sold off out of all proportion to the 'gain' in the currency. There are obviously sellers lurking

As I mentioned in my Saturday column, it would be no surprise to see another big jump in gold open interest on Friday when the report came out on Monday... well, there was. Gold o.i. rose another 10,711 contracts. Total gold open interest now sits at 521,455 contracts... and Friday's volume was a monstrous 200,380 contracts. In silver, open interest was up a smallish 714 contracts. Total open interest is now north of 140,000... at 140,144 contracts! Volume was a pretty substantial 45,591 contracts. There's no sign whatsoever that the bullion banks are backing down one inch in either metal.

The missing Bank Participation Report [for positions held at the end of trading on Tuesday, November 3rd] put in an appearance late yesterday afternoon. Here's the Reader's Digest version... In silver, two [2] U.S. banks [JPMorgan and HSBC USA] are short 41,318 Comex contracts. They also show 1,426 long positions... for a net short position of 39,892 Comex contracts... which represents 30.9% of the entire Comex open interest in silver. Taking out all the market-neutral spread trades would drive this percent of open interest [on the short side] to around 45%... and that's just two U.S. banks!!! That's preposterous!!! If that 45% is true, then it means that JPMorgan and HSBC hold virtually the entire Comex net short position all by themselves.

Now for silver and the non-U.S. banks. There are currently eight [8] non-U.S. banks that hold Comex positions... 2,155 long contracts and 1,578 short contracts. These 8 banks are net long 577 Comex contracts... and these contracts represent 0.45% of total open interest.

In gold, two [2] U.S. banks [JPMorgan and HSBC USA] are short 123,331 Comex gold contracts. They also hold 523 long Comex contracts. Their net short position in gold is 122,808 Comex contracts. These two above banks hold 24.9% of the entire open interest in Comex gold... all of it held short. If I take out the market-neutral spread trades, these two U.S. bullion banks are short more than 30% of the entire Comex gold market.

Now, for the non-U.S. bullion banks, of which there are 18 in total that hold Comex gold contracts. They are long 7,914 contracts and short 39,340 Comex contracts. Their net short position is 31,426 Comex contracts spread over 18 banks. This represents 6.4% of the total open interest... but well under 1% for each of the 18 non-U.S. banks. Not that I want to muddy the water at this point, but I would bet a fair chunk of money that of the 31,426 Comex contracts held short by those 18 non-U.S. banks... 75% of that amount is held by less than a third of those 18 banks.

In a nutshell, as of the end of trading last Tuesday [a week ago today], JPMorgan and HSBC USA were short 199.5 million ounces of silver and 12.3 million ounces of gold... about 45% and 30% of total [net] Comex open interest respectively. And the CFTC and your gold and silver companies just sit on their respective asses and do nothing.

Nothing worth reporting as far as gold and silver deliveries into the November contract is concerned. The GLD ETF reported adding another 196,095 troy ounces to their alleged holdings... and there were [of course] no changes reported in SLV. Last week over at the Zürcher Kantonalbank in Switzerland, they added 9,975 ounces of gold and 198,981 ounces of silver to their respective ETFs. I thank Carl Loeb for providing this report. The U.S. Mint did not have anything to say for itself yesterday, but the Comex-approved warehouses indicated that another 444,379 ounces of silver were withdrawn.

There were the usual two reports from the New York gold commentator yesterday... "India was an importer on Monday, as it's bid to the world gold market was protected by the rupee, which rose 0.7% to close at $1=R46.46. The stock market gained 2.11%." A Reuters story reported that... I see purchases from India. Although it's not really a buying spree, I would say it's quite good, said a dealer in Singapore. If you calculate the price in rupees, it's still OK for them, he said." [The link to this story appears further down in my commentary. - Ed]

"Several parties make the point to Reuters that scrap inflows are weak, an observation echoed by Mitusui-HK today. This, of course, is a profound difference from early this year."

"Reuters kindly provided two readings on the Vietnamese local gold market [in response to a query by me]. At 3:10 GMT [Monday morning in Vietnam], local gold stood at a stunning $44.44 premium to world gold of $1,099.90, and at 4:20 GMT... $35.70 to world gold of $1,104.10 [Friday $6.41/1,090.30]. There appears to be a gold stampede in Vietnam, which is impacting the black market FX rate for the dong.

"Early this year, of course, Vietnam was a heavy exporter of gold scrap."

"TOCOM [on Monday] responded favorably to gold's move... with the public adding 1.4 tonnes to its long. Volume was a heavy 17,202 Comex lots."

"Spot gold cleared $1,110 just as the NY floor session opened, but since then action has been subdued. Gold in Euros has actually lost appreciable ground as the US$ tries to stabilize. Trading volume started heavy [estimated volume was 65,241 contracts by 9AM], but slowed right down by 1:30PM. Then, in a repeat of the pattern common earlier in the decade... and revived on Friday... estimated volume surged in the last half-hour of the floor session." The total jumped to 134,019 for day: almost $5 was knocked off gold so that December gold settled up only $5.70, some $8 below the intraday high."

"As a result of this, 73% of the day's estimated volume was packed into the first 50 minutes and the last 30 minutes of the session. ScotiaMocatta suggests the late decline was due to 'investor selling': others would read the pattern as that of a supervised market. [Which is exactly what it is! - Ed]

"Possibly buoyed by general stock market euphoria, gold shares took gold's erosion quite well. The HUI closed up 3.97% and the XAU up 4.03%, having peaked at up 5.6% and 5.2% respectively. The CEF bullion vehicle showed an unexciting 9.5% premium to NAV at the close, but indicated [moments after the NY close] an intention to do one of their periodic secondary offerings. Presumably this means that the highly experienced managers of this entity have indications [that] fresh stock can be placed: suggesting a robust market." [See further down for that story. - Ed]

"Supporting the CEF news, the GLD ETF showed a 6.09921 tonne increase in bullion holdings to 1,114.44337 tonnes -- the biggest in some time."

"Vietnam, which has numerous 'trading floors' [read 'black market'. - Ed] to facilitate activity by its ultra-gold conscious public, appears to be having a private gold short squeeze. Local gold early on Tuesday morning stood at an astonishing $59.37 premium to world gold of $1,102. [That has to be some sort of record! - Ed] Gold has to be smuggled into Vietnam at present, no doubt making physical settlement awkward."

"In other premium news, the Istanbul Gold Exchange was quoted kilo bars at a $2.50/ounce premium to world gold of $1,106.08 on Tuesday morning -- quite respectable, considering world gold's move. The active Shanghai Gold Exchange contract stood at a 73c discount to world gold. Shanghai rarely shows enthusiasm for gold."

Here's a graph [courtesy of Nick Laird of sharelynx.com in Australia]. It's Friday's graph, as he was having website problems and I couldn't retrieve his chart for yesterday's close... but this will do. It shows the value of all the in-the-money call options. The huge position at $1,000 [over 15,000 Comex contracts] stands out like a sore thumb. If the bullion banks want to blast these guys out, so their options expire worthless, they're going to have to get the gold price below $1,000 by November 23rd... which is Comex options expiry. The 50-day moving average won't do anymore... as it's at $1,028 already... and to really do some real damage, da boyz would have to blast the price well below its 200-day moving average, which is $955 at this writing. Can they... or will they? Don't know. Both Ted Butler and I are waiting to see if they can pull this off. If they can, they're certainly leaving it to the last minute... which they've done before.

I have so many stories to bring to your attention today that I stopped counting at ten... but the first story was easy. The usual NY gold commentator mentioned it above... "Central Fund of Canada Announces Proposed Offering"... "The amount of U.S.$1,000,000,000 [US$1 billion] provided for in the base shelf prospectus is available for this offering." Shortly after 8:00 a.m. Eastern time this morning, the results of this offering will be made public. How well it's received should tell us a lot about physical demand. I'm expecting/hoping for a really big number... and will be somewhat disappointed if it's not. I thank Andy Hoffman for bringing this story to my attention yesterday afternoon, and the link is here.

The next story is about the gold purchases by Sri Lanka. Not on the scale purchased by India, but a central bank purchase nonetheless. The purchase is estimated at 5.3 tonnes... and the link to the google.com story is here.

The next gold-related story is from Sunday's Financial Times out of London. Neither the paper nor the author of this piece, John Dizard, are fans of gold, but Dizard writes a very bullish piece about the prospects for the gold price in the longer term. The article is headlined "Why gold is certain to move higher"... and the link is here.

The next story is from The Times out of London. The author, William Rees-Mogg is a huge fan of gold, and this story is certainly worth reading as well. The headline reads "Which Will Come Out on Top -- Paper or Gold?"... and the link is here.

Here's a Reuters story that I lifted from Kitco yesterday. It's filed from Singapore and is headlined "Jewellers snap up gold, shrug off record price"... and the link is here.

The next gold story is a piece that was in Saturday's The New York Times. The story [along with a pretty picture] is headlined "Inside the Global Gold Frenzy"... and the link is here.

This Reuters piece was posted on Sunday and filed from London. All of these finance ministers and central bank governors of the Group of 20 major countries that met in Scotland over the weekend, didn't agree on much... and the headline reads "G20 leaves door open for fresh pressure on dollar"... and the link is here.

The next story is by Ambrose Evans-Pritchard over at The Telegraph in London. "Europe's industry federation has called for urgent measures to cap the surging euro after it blasted through $1.50 against the US dollar and 10.25 against China's yuan on unexpectedly strong data from Germany." It appears that there is growing pressure inside Germany to devalue the euro. The article is headlined "Europe's industry slams China over currency"... and the link is here.

Here's another story that I 'borrowed' from Kitco yesterday morning. The opening sentence of the Reuters article speaks volumes... "Russia's central bank does not exclude further rate cuts before the end of 2009 and may buy gold from the state repository, Gokhran..." Gokhran is the same repository that announced just two weeks ago that it was going to sell up to 50 tonnes of gold in the open market. Any bets that the Russian Central Bank will snap it up? Russia reports its gold purchases at the beginning of the third week of every month... so it's purchases for the last three months of 2009 will be worth watching... and I will report on them the moment they are available... which is usually around the 20th. The Reuters story about its proposed gold purchases is well worth reading... and the link is here.

Here's the only story today that's not about gold or currencies. This is one that Craig McCarty sent around yesterday afternoon. It's a must read from one end to the other. It's from The Guardian in London. "The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage, for fear of triggering panic buying." This revelation does not surprise me one bit. Peak oil was in 2005... and we've been slowly sliding down the other side of Hubbard's Peak since then. The headline reads "Key oil figures were distorted by US pressure, says whistleblower"... and the link is here.

For reasons I won't get into here, this next story put a really big smile on my face. The story appeared in Canada's Financial Post newspaper yesterday. Peter Grandich has challenged Kitco's Jon Nadler to a live television debate on gold. I will be absolutely amazed if Nadler rises to the challenge. I'm sure he'll slither out of it in his daily commentary over at Kitco this morning. The story is worth the read... with the headline "Grandich vs Nadler"... and the link is here.

The [second to last] story is a GATA dispatch. The headline pretty much spells it out... "Investment firm chief backs GATA on Bloomberg Asia TV"... "Viewers of Bloomberg Television's Asian news programming today saw a vigorous endorsement of GATA's work by Juerg Kiener, managing director and chief investment officer of Swiss Asia Capital in Singapore. Keiner added that it is "impossible" for two banks to hold most of the short position in the silver futures market without it being manipulation." [Keiner is talking about the Bank Participation Report I spoke of earlier. - Ed]... and the link to the GATA release is here.

And lastly... finally... is the really big story of the day. GATA's secretary treasurer, Chris Powell, was in Munich last week and gave this 50-minute speech to a packed house. It's a must read... but I can understand if you put it off until you have more time... but it's well worth the effort. Here's the introduction... and then the link to the speech itself, follows....
"What a delight it was for your secretary/treasurer to attend Internationale Edelmetall & Rohstoffmesse's Precious Metals and Commodities Show this weekend in Munich, Germany. While the precious metals sector in the United States seems subdued [if not disheartened] right now, despite the surge in gold and silver prices, the Munich show was jumping with high attendance, enthusiasm, good sales at the many coin and bullion dealer booths, and serious interest in the junior mining companies that exhibited."

"GATA's message, carried by your secretary/treasurer, was received agreeably by an attentive audience in a full speaker hall, and was followed by many questions demonstrating a stunning familiarity with the issues of gold price suppression and currency market rigging. If the Munich show is representative, mainland Europe has a good idea of what's going on with gold and silver."

"Your secretary/treasurer's presentation in Munich, a combination of previous presentations detailing the evidence of the gold price suppression scheme and adding commentary on recent events, is entitled "Gold Suppression is Public Policy and Public Record, Not Conspiracy Theory"... and the link is here.

A massive plus for gold - and for silver - at this time is that they are still off the radar of the vast majority of investors, who innocently believe that their Fiat masters have ridden to their rescue on the recently created tidal wave of manufactured liquidity, and consider gold and silver to be the province of fringe wing survivalist eccentrics. We are thus still a long, long way from the kind of frothy public involvement that will mark the beginning of the end of the Precious Metals bull market. - Clive Maund, 07 November 2009

As I mentioned in my comments about the options expiry graph earlier... that's a picture of what the bullion banks would like to accomplish. Judging by all the positive gold stories that are now pouring in on a daily basis, they are cutting this rather close. Then there's the matter of new [and enforced] position limits for both silver and gold... silver especially. One CFTC commissioner said that the last week of November was a likely target... which sounds suspiciously like "after options expiry for the December contract" to me... but who really knows. I'm just making an educated guess. We'll find out, as they say, in the fullness of time.

Not much happened in Far East trading earlier today. London is now open and the gold price is oscillating around the $1,100 mark... and silver, at it's low just before the London open, got down to around $16.24... which is down more than 50 cents from yesterday's high. Volume is already very heavy. In gold, it's about 28,300 contracts... and in silver, volume is about 4,700 contracts. The U.S. dollar is heading lower as I write this last paragraph, so I'm ready for just about any eventuality when New York opens... and nothing would surprise me.

I hope your Tuesday goes well... and I'll see you here tomorrow. It's 4:20 a.m. here in Edmonton... and I'm off to bed.