Gold Breaks Above $1,115 in London: Will JPMorgan Show Up Today?

I wouldn't read a lot into Monday's gold trading, except for the fact that the attempt by both gold and silver to take off to the upside the moment that the London p.m. gold fix was in at 10:00 a.m. New York time, ran into the usual brick wall. From that spike high, gold got $10 shaved off its price... and silver around 40 cents. Gold managed to recover most of that loss by the end of electronic trading in New York... and tacked on a smallish $3 gain.

But silver did not join in... and lost 27 cents from Monday's closing price.

Monday's open interest numbers were a bit of a surprise... as I was expecting a slight improvement in both metals... considering the negative price action. But that was not to be. Gold open interest rose a tiny 163 contracts on pretty big volume of 164,004 contracts. Total open interest for gold is sitting at 521,618 contracts. In silver, o.i. rose a tiny 131 contracts. Volume was pretty chunky as well... 38,039 contracts. Total silver o.i. is 140,275 contracts.

As per usual, there were some small deliveries in both gold and silver reported by the CME yesterday, but nothing of consequence. There were no reported changes in either the GLD or SLV. The U.S. Mint reported that another 4,000 gold and 25,000 silver eagles were minted... and over at the Comex-approved depositories, another 450,373 ounces of silver were reported withdrawn.

The usual New York gold commentator had the following to report yesterday... "India was not an importer yesterday, as the rupee softened slightly and the stock market slipped 0.35%"

"A BBC video clip arguing that Indian gold appetite is deep-seated [probably true] is particularly notable for the depressed expressions of the fathers accompanying their jewellery-purchasing daughters." [The 2-minute clip is linked here... and is well worth watching. - Ed]

"The 'General Public' on TOCOM has begun to sell... they cut 2.432 tonnes [7.7%] from their long."

"The European Central Bank weekly statement of condition indicates a €20 million decline in 'gold and gold receivables' attributed to 'issue of commemorative gold coins by one Eurosystem central bank'. That is 0.91 tonnes at the present book value. Last week a central bank bought €1 million worth of gold coin. If this week's transaction is not deemed a conventional sale, there have been no ECB group sales for 4 weeks. The current Washington Agreement on Gold accommodates weekly average sales of 7.69 tonnes."

"Around midnight NY time [early Tuesday morning - Ed] gold was suddenly hit for $5 on selling [that] some attributed to the possibility of UK sovereign debt being downgraded -- completely counterintuitive. An impressive mid-NY morning rally saw December gold up $8.30, but that is now being eroded. Estimated volume at 11AM was a fairly heavy 95,298 lots."

Then late last night, he added these comments...

"Tuesday's strong NY morning rally peaked up $8.30, and then was battered down into negative territory after 11AM on what MKS describes as 'large selling'. The floor session closed December gold up only $1.10 at $1,102.50; estimated volume was 150,236 lots. In the aftermarket, gold had added some $2.60 by 4PM and more since. Euro gold has been tracking US$ gold closely."

"Gold shares reacted badly to gold's excursion into down $4 territory in the early afternoon, with the HUI bottoming at down 2.2% and the XAU down 1.9%. Their response to gold's subsequent rally was muted: the HUI closed up 0.09% and the XAU up 0.18%."

"Central Fund of Canada did indeed succeed in a large secondary: some $230 million of stock placed, increasing outstanding shares by 9.2%. Quite some appetite. The closing premium to NAV was reported as 8.2%."

"Vietnam local gold stood at a $57.50 premium to world gold of $1,106.30 early Wednesday morning [Tuesday $59.37/$1,102]. The unofficial dong slid again. Reuters reports: Traders have said the spread between the price of gold onshore and abroad has created a surge in demand for dollars."

As was mentioned above, the Central Fund's offering was a big success, as $230 million was raised. This roughly translates into 107,000 ounces of gold and 5.3 million ounces of silver... if the current gold/silver/cash ratios in the fund are maintained. The link to the story is here.

I'm happy to report that I have significantly less stories today than yesterday. The first is courtesy of Wesley Legrand, and is a piece out of The New York Times. It shows just how big the problems are in Germany... and how much worse they're going to get in 2010. Of course, these problems are to be found in just about every western country these days. The story is headlined "Merkel Says Worst Sill Ahead in Germany"... and the link is here.

The next story is an op-ed piece out of The Wall Street Journal last week. It's written by Mark Spitznagel, who is the founder and chief investment officer of the hedge fund Universal Investments LP, base in Santa Monica, California. It's a brief story about Ludwig von Mises... and the headline reads "The Man Who Predicted the Depression". I thank P.S. for sending it along... and the link is here.

Of course it should come as no surprise to you, dear reader, that Kitco's Jon Nadler has refused Peter Grandich's challenge to a nation-wide television debate [in Canada] on the gold market. But no one should be too hard on Nadler. For years now, few gold market analysts have wanted to address any of the market's uncomfortable specifics, particularly the growing evidence and acknowledgements of market manipulation. Grandich's report on Nadler's refusal to debate can be found posted at the agoracom.com website... and the link is here.

A couple of things from James Turk today. The first is commentary from his fgmr.com website entitled "America's Jobless Recovery"... which is linked here. The second item is a 20-minute interview with GoldSeek Radio's Chris Waltzek. GoldMoney founder and GATA consultant, James Turk, discussed the prospects for gold and silver, as well as evidence that the exchange-traded fund GLD is something less than g-o-l-d. The link to the interview is here.

And lastly is this very interesting Reuters piece. Both Ted Butler and myself are awaiting the new position limits that are supposed to be put into effect for the energy and precious metals markets. I mentioned yesterday that Commissioner Bart Chilton from the CFTC had said 'late November' was a likely time frame. In this news story, Chilton is now saying early December. He's deliberately vague as to what's coming, but he says "that there are issues that need to be addressed [and silver would be the #1 issue. - Ed] and that doing nothing is not an option." The story is very short...4 whole paragraphs... and the link is here.

Beware the leader who bangs the drums of war in order to whip the citizenry into a patriotic fervor, for patriotism is indeed a double-edged sword. It both emboldens the blood, just as it narrows the mind. And when the drums of war have reached a fever pitch and the blood boils with hate and the mind has closed, the leader will have no need in seizing the rights of the citizenry. Rather, the citizenry, infused with fear and blinded by patriotism, will offer up all of their rights unto the leader and gladly so. How do I know? For this is what I have done. And I am Caesar.

I note, as I put this commentary to bed, that both gold and silver have really taken off to the upside. This started about 2:30 p.m. during Hong Kong trading... and has accelerated through the London open. Trading volume in gold at this moment [4:45 a.m. Eastern time] is monstrous... with 35,355 contracts already traded in December. Silver's volume is tiny by comparison... only 7,842 contracts traded. It will be interesting to see when the bullion banks drop the hammer on this break out... and when they do, how hard will they hit it. The dollar has fallen out of bed as well, but not to the same extent as gold's gain.

It could turn into a lively trading session in New York if 'da boyz' don't get a handle on this pretty quick.

See you on Thursday.