Comex Silver Stocks Drop Another 1.2 Million Ounces

Gold's low of the day was shortly after the Hong Kong gold market opened on Friday morning at 9:00 a.m. local time... 8:00 p.m. Thursday night on the U.S. east coast. From there, and in fits and starts, the price rose from around $1,101 up to $1,110 by the close of Hong Kong trading. Then, gold got sold off about $7 going into the London p.m. gold fix at 3:00 p.m. in England. But once the p.m. fix was in, gold added about $14 in the next couple hours... and from there, drifted higher right into the close of electronic trading at 5:15 p.m. in New York... virtually on its high of the day. Friday's close was also a new record-high closing price for gold as well.

I can't remember the last time that gold put in such a performance on a Friday. I don't know what to make of it... but whatever it is, it certainly can't be a negative. Normal action on Friday is for activity to peter out in the New York afternoon... but that didn't happen yesterday. Does somebody knows something? Too bad the final open interest numbers for yesterday's trading won't be known until late Monday morning.

Silver's low in Far East trading appeared to come during early morning trading in Sydney... and from there [like the gold price] climbed to its Far East high right at the close of Hong Kong trading. From there, it got sold off more than 2% to it's low of the day... shortly before the London p.m. gold fix. The sell-off in silver also picked up steam once the London silver fix was in at noon London time... which is 7:00 a.m. in New York. With its N.Y. low and the London p.m. gold fix behind it, silver [like gold] took off to the upside for a couple of hours. From there, its price meandered a bit, but [like gold] managed to finish within a few pennies of its high of the day.

And, like gold, I can't remember a Friday performance like this before in silver. Very curious.

But then again... maybe not.

For those of you who have followed the work of GATA in gold... and Ted Butler in silver... you already have an excellent working knowledge of exactly what's going on in both metals. When GATA was formed back in 1999, it took our little group a couple of years to figure out that we had run up against all the money and all the power in the world... something that silver analyst Ted Butler had already been fighting for 15 years.

All of us feel that the end of this game is now in sight. Like most seismological events... a big earthquake or volcanic eruption... there are lots of small and medium-sized earthquakes, ground deformation, out-gassing, steam and ash eruptions... all of which occur before the main event. It's rare for a major earthquake to occur without any warning whatsoever... but it certainly does happen.

This is what we now face in gold and silver... especially the silver market. It's my opinion that what we saw today was a foreshock... another data point that's a warning of future events. And there have been quite a few of them in the last couple of months... and now they're coming thick and fast.

Ted Butler wrote a piece on this issue for his private clients on Wednesday, November 11th... Remembrance Day... and here's a snippet from his essay entitled "The Breaking Point"; "My analysis has always convinced me that it's just one U.S. bank that holds, effectively, the bulk of the concentrated silver and gold Comex short positions, and that JPMorgan is that bank. While I'm still unsure whether JPM will be able to rig one more sell-off, it's important to recognize the hole they are in and the danger associated with them being cornered. Regardless, we are getting very close to the final breaking point, in which something big will develop in silver... If a sell-off can't be rigged by JPMorgan and they get caught with the "full pants down", the price rally will prove epic. Allow me to rephrase that. With, or without, a sell-off... the eventual price rally in silver will prove epic."

The open interest numbers for Thursday's trading in gold are as follows. Open interest rose 2,740 contracts on another huge volume day. This time it was 195,366 contracts. Total gold o.i. is now at 518,070 contracts. In silver, open interest actually fell a smallish 347 contracts, on pretty chunky volume of 44,263 contracts. Silver o.i. is down to 133,987 contracts, which is still monstrously high.

The Commitment of Traders report was issued yesterday... for positions held at the close of trading on Tuesday, November 10th... and there was hardly a thing worth mentioning, as there wasn't much change in either metal. In silver, the bullion banks decreased their net short position by an insignificant 237 contracts. And in gold, the bullion banks decreased their net short position by only 1,068 contracts. It's obvious that the grotesque short positions held by the bullion banks has not changed much... and this is the issue that must be resolved, one way or another, sooner or later. And, as usual, Ted Butler was interviewed by Eric King of King World News yesterday... and he has a few things to say about the COT... and the link is here.

There was nothing in the CME delivery report that was worth mentioning. There was a minor withdrawal from GLD yesterday... 17,460 ounces. After Thursday's big add of 5.9 million ounces of silver to the SLV, one would have thought there would have been no changes reported on Friday. One would be wrong! Another 982,540 ounces were added yesterday. There was no report from the U.S. Mint... but over at the Comex-approved depositories, another large quantity of silver was withdrawn. This time it was 1,235,520 ounces troy.

The usual New York gold commentator had one report yesterday... around 2:30 p.m. New York time... "India was not an importer in the morning... but was in the afternoon. This change was due to the rupee, which opened slightly weaker and the strengthened abruptly, closing 0.8% stronger at $1=R46.31. The stock market added 0.92%."

"Reuters obligingly published an afternoon Vietnam gold price. This implied a premium of $32.32 to world gold of $1,105.94 compared to $27.31/$1,102.50 in the morning and $29.14/$1,116.90 yesterday. Mineweb.com has a good story on Vietnamese gold demand, pointing out that... Vietnam recorded the world's largest domestic demand for investment bars in the first quarter of 2008, with almost 39 tonnes of gold bars in the period, equivalent to 39% of investment bar demand for the quarter. When jewellery is added into the equation, Vietnamese demand in the quarter was just 8% of the world's jewellery and investment bar combined." [The mineweb.com story is well worth your time, and I urge you to stop reading my commentary right here, and read this story, which is headlined "The lifting of Vietnam's ban on gold imports could have some remarkable effects on the market"... and the link is here.]

"The Japanese 'general public' continued selling on the TOCOM... as they cut 1.51 tonnes from their long [-5.4%]."

"The CME website indicates that yesterday's down $8 day was associated with a 2,740 rise in open interest [8.52 tonnes]. Volume at 195,366 contracts was 13.9% above the estimate. The Mitsubishi analyst is quoted as saying that some were looking to go short yesterday: the open interest data supports this idea."

"This has proved to be quite unwise as gold rose ferociously right after the stock market opened -- before the dollar started weakening. Euro gold pretty well kept pace. Around Noon it encountered resistance and moved sideways for the rest of the day. December gold closed up $10.10 at $1,116.70; estimated volume was 133,625 of which only 13.5% traded in the afternoon."

"It appears that operators in NY are underestimating the world's appetite for gold."

Today's first story is from the Financial Times out of London. The headline is certainly provocative, as it reads "Super-rich buy gold and sell hedge funds". Let's hope that trend continues... and the link is here.

The next news story is a Bloomberg piece headlined "Dollar Overwhelms Central Banks From Brazil to Korea". Every country wants their currency to be weaker, but they can't keep up with the pace of the U.S. dollar's fall. It's becoming a real problem to keep their exports competitive in this kind of monetary environment. The story is well worth your time... and the link is here.

The next story was in yesterday's edition of The Wall Street Journal. "A broad spectrum of participants are buying up gold as it sits at record highs, all hoping to add a little glitz to their portfolios." The headline reads "Speculative Investment in Gold Seen Broadening". Normally a subscription is required to view this article, but the GATA release has the whole story... and it's linked here.

Mining entrepreneur and longtime gold trader, Jim Sinclair, was interviewed for almost 40 minutes this week by Eric King of King World News... and discussed his life on Wall Street, the doom facing the gold price suppressors now that they are being challenged by governments taking delivery of metal, the stupidity of major mining companies, and the extraordinary potential of junior mining companies. The interview is a tour de force... and the link is here.

Lastly is a piece that I've been sitting ever since it went up on the Internet earlier this week, but it was just too long for week-day reading. It's the story of Rhodesia... now Zimbabwe... and how it got into the situation that it did. I spent a fair amount of time in that country back in the early 1970s... and my impressions were huge, to say the least. Ian Smith was running the place at that time, and Robert Mugabe was one of the black nationalist leaders who had been rotting in jail for almost ten years when I was there.

This is a must read for anyone who wishes to understand how Zimbabwe got to the hyperinflationary situation that it did... and how it may have been a testing ground for what may [or may not] occur in the West as central banks begin running the printing presses in order to 'save' us all. The story is posted over at Kitco and the headline reads "Zimbabwe: A Fresh Start"... and the link to the story is here.

Photo: Matopos National Park, Rhodesia [circa 1972] Credit: Ed Steer

A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and he carries his banners openly. But the traitor moves among those within the gate freely, his sly whispers rustling through all the galleys, heard in the very hall of government itself. For the traitor appears not a traitor - he speaks in the accents familiar to his victims, and wears their face and their garment, and he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation - he works secretly and unknown in the night to undermine the pillars of a city - he infects the body politic so that it can no longer resist. A murderer is less to be feared. ∑ Cicero, 42 B.C.

Today's blast from the past was a performance on one of the Smother's Brothers TV programs way back in the 1960s. It's hard to believe that this song is more than 40 years old. Where the hell has the time gone? Turn up your speakers and click here.

As various commentators have mentioned in this report... and other reports before this one... it sure seems that smoke is billowing out of the gold and silver markets. As Ted Butler said in his interview above... "sooner or later, something has just got to give". The only question remaining is the timing of this event. I'm just wondering if this position limits business that Chairman Gary Gensler of the CFTC is going on about, may be the trigger for whatever market event that's about to occur... correction or no correction.

I can pretty much bet that if we get a massive move to the upside in silver and gold, there will be absolutely no time to react. You'll either be in... or standing at the station waiting for a pull-back that will probably never come. Silver and gold will simply be re-priced virtually overnight... maybe on a weekend.

That's why I keep pounding the table about Casey Research's flagship publication the Casey's International Speculator. Yes, it carries a bit of a price tag, but that will be pocket change when silver and gold reach the kind of prices that I'm expecting. This is not a time to be out of the market. I've been "all in" for a long time. I know what's coming and I have no intention of missing what I consider to be a once-in-a-lifetime price move. I urge you to give this serious consideration.

Enjoy the rest of your weekend... and we'll see what Monday has in store for us.