British Gold Fund #1 Performer in England For The Last Ten Years

As I said in my closing paragraph yesterday, the bullion banks always hit the gold and silver price the moment that the jobs report is issued... and I also said... that you, dear reader, should "look for it."

Well, you didn't have to look very hard, as you could have set your watch by it yesterday morning... and, as I've been saying for over a week, the precious metals market was horribly overbought and some sort of correction [manufactured or otherwise] was imminent. This one was made to order by the Fed and JPMorgan et al. The graph says it all.

Gold got all the way down to about $1,148 in electronic trading in the New York afternoon before the selling pressure abated and buyers showed up.

The silver price action was unexpected. Normally, when gold gets hit this big, silver really gets it in the neck. Why it wasn't down $1.50 to $2.00 was a surprise to both Ted Butler and myself. True, the silver price had been declining for the previous two days, however this price correction for silver [at least so far] is not turning out as expected... and that [in and of itself] is worth keeping an eye on.

Not only was there a manufactured decline in the gold and silver price... but there was also a manufactured rally in the US$ at the same time. And if you, dear reader, think that it's too much of a coincidence... you would be right about that.

The precious metals stocks were slaughtered... but I've seen worse percentage declines than this on much smaller price drops... and neither the HUI nor the XAU closed at their respective lows of the day.

Volume in gold trading yesterday was gargantuan... and since we're well past options expiry and first day notice... there are virtually no switches or spreads in both the gold and silver volumes. I didn't add it up for all months, but just eye-balling it, gold volume was north of 380,000 contracts... 354,055 in the front month [February] alone. In silver, volume was a bit over 50,000 contracts, of which 48,000 were in March... silver's front month. How much open interest declined in both metals yesterday is the $64,000 question. The 50-day moving averages in both metals are still very much intact... so we'll just have to wait it out until the final numbers are posted on the CME's website late on Monday morning.

As far as Thursday's open interest changes go... I have the following. Gold open interest increased a chunky 10,664 contracts to 530,367 contracts total open interest. Volume was a very healthy 240,174 contracts. Silver open interest went the other way... which was natural, considering that the price was declining... down 1,036 contracts. Volume on Thursday was 46,194 contracts. Total silver open interest sits at 130,848 contracts.

Friday's preliminary open interest numbers for the December delivery month have been updated at the CME website. They show that another 1,619 contracts have been shaved from December's gold open interest... which is now down to 7,364 contracts left to be delivered. In silver, there was another big decline in December's open interest... this time by 492 contracts... leaving only 1,067 remaining to be delivered in December.

The Commitment of Traders report yesterday was not very interesting, as not much appeared to have happened. There was minor improvement in silver, as the bullion banks decreased their net short position by a smallish 621 contracts. The net short position in silver [as of the end of trading on Tuesday] stood at 63,824 contracts... 319.1 million ounces. The full-colour inter-active COT graph for silver is linked here.

In gold, a new high [or low, depending on your point of view] watermark was set in the bullion banks' net short position... which increased by 2,127 contracts. The bullion banks now hold a net short position of 308,231 gold contracts, or 30.8 million ounces of the stuff... which is about 0.2 million ounces more than the old record set last week. The full-colour interactive COT graph for gold is linked here.

Silver analyst Ted Butler has much more to say about the COT [and last week's silver action] in his exclusive weekly interview with Eric King over at King World News. I urge you to stop here and listen to what Ted has to say before you continue further... and the link is here.

The Bank Participation Report was issued yesterday as well. U.S. banks are still net short 40,957 Comex silver contracts... 31.1% of the Comex's entire silver open interest. But this report is deficient and doesn't show how many U.S. or Non-U.S. banks are involved... but the numbers on both the long and short side are pretty much the same as last month's numbers... so I will make the assumption that only two banks are involved. These two banks are long 1,776 Comex contracts and short 42,733 Comex contracts. There are 10 non-U.S. banks with long and short positions on the Comex. They hold 1,977 longs and 2,022 shorts... which is basically market neutral and naturally represents 0% of the Comex open interest in silver.

In gold, it now shows that 4 U.S. banks in December's report [vs. 2 in the November report] are long 2,206 Comex contracts and short 133,596 Comex contracts for a net short position of 131,390 Comex gold contracts...25.2% of the entire gold open interest. This is up about 8,000 contracts from November's report. The non-U.S. banks [of which there are 15] are long 7,466 Comex contracts and short 28,921 Comex contracts. This nets out to 21,456 contracts held net short on the Comex... 4.1% of total open interest in Comex gold. The foreign banks held about 31,500 Comex gold contracts net short in November's report, so they've managed to off-load about 10,000 short positions in the last month. December's Bank Participation Report is linked here. The silver and gold numbers are about two thirds of the way down the page.

The CME's Daily Delivery Notices for gold and silver showed that 208 gold... and a very small 10 silver contracts... were put up for delivery on Tuesday. The GLD ETF showed a surprising drop in inventory yesterday... down 49,012 ounces. There were no changes over at SLV. The U.S. Mint had a minor update yesterday... with another 10,500 ounces of fractional gold eagle coins reported sold... along with another 2,000 24K gold buffaloes. And it should be no surprise that there were no updates in either the one ounce gold or silver eagle bullion coins. The Comex-approved depositories reported a small increase in silver inventories of 71,219 troy ounces.

Today's first story is from The Telegraph in London. It appears that a British gold fund has been the best performing investment fund of the past decade over in the Old Country. I would suspect, if one checks around, that gold funds world-wide are leading the investment pack as far as returns go... especially here in Canada and the USA. The photo is great, the story is short... and the link is here.

The next story is a youtube.com video. In it, U.S. Senator Jim Bunning delivers his statement at the Senate Banking Committee explaining why he will oppose the nomination of Ben Bernanke to serve a second term as Chairman of the Federal Reserve. He basically burns Bernanke at the monetary stake... and his closing comments... made my hair stand on end. This whole video is worth listening to... and watching... and the link is here.

The next story is from today's edition of The Wall Street Journal The story, filed from Beijing, states that "China sought to reassure the world that it is taking a conservative approach to managing its massive foreign-exchange reserves, with officials saying it hasn't made big changes to its strategy and the dollar remains a central asset." Normally you would need a subscription to read this article, but it's posted in the clear over at gata.org and the link is here.

I've got two more short items on the "Climategate" story... the story of how the 'global warming' hucksters got caught literally "cooking" the numbers. The first is a short piece from newsmax.com headlined "Gore Should Give Back Oscar, Two Academy Members Say". I've seen it... and I heartily agree. I thank Casey Research's Jeff Clark for bringing it to my attention... and the link is here.

The other story is a CBC-TV commentary from here in Canada by the irascible Rex Murphy. Rex has been around since dirt... and Keith Olbermann in the U.S.A. would be his American equivalent... sort of. Murphy, whose command of the English language is complete, minces no words and takes no prisoners... which ain't too bad for a boy from Carbonear, Newfoundland. This four minute video clip is not to be missed... and the link is here.

The next item I have for you today is an interview with goldmoney.com's founder, James Turk. This interview is also with Eric King over at King World News. James spends a lot of time talking about 'Stage 2' of gold's bull market. It's a fairly long interview, but more than worth your time... in my humble opinion... and the link is here.

And lastly, is this very long... but very interesting and entertaining... essay by James Grant of Grant's Interest Rate Observer. It's posted at The Wall Street Journal and is entitled Requiem for the Dollar. The essay is imbedded in a GATA release... and the preamble by GATA's secretary treasurer, Chris Powell, is worth noting... and the link is here.

Below is a gold graph that goes back about three and a half months. I want you to note just how quickly the RSI trace went from overbought at about 82... down to it's current neutral reading of 56.38. It took two whole days. IF we get another couple of days worth of hard selling, we could be into oversold territory pretty quickly. It's about the same situation in silver.

This correction should have been no surprise to you dear reader... as it certainly was no surprise to me. Of course what happens from here is totally dependent on what 'da boyz' are going to do. Will we see a continuation of this dollar 'rally'? How far down in price is this correction going to go? How long will it last? Nobody knows. I certainly don't.

But what I do know is this, that when this correction has run its course, it might be the last decent entry point to buy the precious metals and their shares for a very long time to come... as this bull market in gold and silver has a long long way to go before it breaths its last.

The gold open in Far East trading on Monday morning should be educational when it begins at 6:00 p.m. Eastern time on Sunday evening.

Enjoy the rest of your weekend and I'll see you here on Tuesday morning,