Russia's Central Bank Buys 964,500 Troy Ounces of Gold

Gold opened on a positive note in early trading in the Far East on Monday morning... spiking as high as $1,120 before a not-for-profit seller showed up and tapped the price back down. From there, it didn't do much through the balance of Far East and European trading, but was inching back towards the $1,120 mark until precisely 9:00 a.m. when a wall of selling appeared. Three hours and fourty-five minutes later, gold hit its low of the day which Kitco reported as $1,088.90 spot. The 9:00 a.m. high was $1,118.70 spot... so it was $30 from its high of the day to its low. The selling pressure stopped at that point and gold gained back a few dollars of its loss before New York market closed for the day.

Silver's path was similar, but its peak price of the day was about 11:30 a.m. in Hong Kong trading... moments before Sydney closed for the day. From it's high of around $17.50... silver's price declined about 25 cents. This ended the moment that Hong Kong closed in their afternoon. During London and early New York trading, silver picked up a dime... but, like gold, the roof caved in around 9:00 a.m. Four hours and fifteen minutes later, silver bottomed out at its low price of the day, which was $16.93 spot. From it's high price in Hong Kong, to it's New York low, silver got hit for about 57 cents. From there, silver gained a few pennies, but basically finished on its low of the day.

The U.S. dollar gained less than 50 basis points while these waterfall declines were going on... so these declines had little to do with the dollar. This had all the hallmarks of a bear raid by the bullion banks... which, in fact, is was what it was. Run the dollar up... bash gold and silver.

Surprisingly enough, the shares... although down... did not get hit as hard as one would have expected. So it could have been worse.

The changes in open interest for Friday [which were reported at noon yesterday] showed that volume was a pretty light 184,815 contracts. Open interest showed a big decline of 9,808 contracts. This decline wasn't from Friday's trading activity... it was delayed reporting from Thursday's big price drop. As I mentioned in my Saturday commentary, I would wait for Monday's o.i. report before I threw a hissy fit. Ted Butler was pleased that the open interest was down... but was expecting a bigger number than that. Gold's total open interest is now back under 500K at 493,122 contracts.

Silver's open interest showed another increase... this time a tiny 95 contracts. Friday's silver volume traded was a very small 28,757... with total o.i. at 122,188 contracts.

Using last Thursday's precious metals drubbing as a case study... it would appear that Monday's shellacking of the precious metals prices won't be in the CME open interest report until Wednesday... not today, like it should be. If that's the case, then it will arrive too late for the cut-off for the next Commitment of Traders report... which is at the close of trading today. We'll find out around noon if that's the case or not. With the Christmas holiday schedule being what it is, I wouldn't bet on seeing the next COT report until at least Monday of next week at the earliest.

Monday's Delivery Notice from the CME showed that 66 gold and 48 silver contracts are up for delivery on Wednesday. The GLD ETF reported adding another 196,007 troy ounces of gold yesterday... and nothing was added to SLV. The Zürcher Kantonalbank in Switzerland reported a third straight week of declines in their gold ETF. Last week it dropped by 33,143 ounces. But, once again, their silver ETF had another phenomenal week... they reported adding 1,034,829 ounces troy! [I thank Carl Loeb for these numbers] For many months now, large quantities of silver have been going into ZKB's silver ETF. Someone with deep pockets, dear reader, is buying huge quantities of silver. I would guess that whoever is doing the buying knows what we know... silver's days, as a cheap metal, are numbered. Silver bullion coins are in everyone's Christmas stocking at my house again this year.

The U.S. Mint had no report... and the good folks over at the Comex-approved warehouses showed a rather large 871,738 troy ounces of silver were taken into inventory... all of at the Brink's Inc. depository.

As you, dear reader, are more than aware... I spend a lot of time talking about the net short positions in Comex gold and silver... and the '4 or less' or '8 or less' traders who hold those grotesque positions. They are, of course, all bullion banks. But, you may ask, just how grotesque are they? Well, thanks to my good friend Carl Loeb, here is a graph that tells all. This graph is pretty much all one would need in a court of law to prove a prima facie case of a short side market manipulation.

The big story yesterday was one I spoke of in this column late last week. It's the announced purchase of 30 tonnes of gold by Russia's Central bank; which, according to the report, was a done deal last week. As I said in Friday's commentary, I believe, this will add another 960,000 ounces to the 19.7 million ounces that the Russian Central Bank currently owns. One can assume [allowing for a rounding error] the next report from the RCB will show 20.7 million ounces of gold... 643 tonnes. The yahoo.com story regarding this is a must read... and the link is here.

The next gold story is from the Saturday edition The Times of London. The headline reads Where next for the soaring price of gold? The story contains comments from a wide variety of so-called gold 'commentators'... most of whom couldn't find their behinds with both hands and a flashlight... Nouriel Roubini being the spear carrier for that lot. So pick your way through this story, and see what you think of it all. The link is here.

The next piece is a silver-related story filed from Mumbai and posted at the economictimesindia.com. The headline reads "Silver may continue to outshine gold's performance in 2010". It's not a long piece... and I consider it very much worth your time. I thank reader "Chris from Calgary" for bringing it to my attention... and the link is here.

The story of how the Royal Canadian Mint 'lost' 17,500 troy ounces of gold just won't go away. Here's the latest in the ongoing saga... courtesy of the ottawacitizen.com. The headline reads "Royal Canadian Mint reveals how it lost gold"... and the link is here.

I note that James Turk had another terrific piece posted at his fgmr.com website. The headline reads "Will Sovereign Debt Defaults Bring the End of Socialism?" This short essay is very much worth reading... and I suggest you do exactly that... and the link is here.

This item is a piece from the Saturday edition of The Telegraph. It's another story about how policymakers have loaded up the nation's "balance sheet with even more public debt and are printing money like crazy." Basically this story rips the City of London and the U.K. government a new one. England is now in the same boat as Greece. 2010 will be an interesting year for the 'old country'. The piece is entitled "Deflationary myth is poor excuse for irresponsible policy excesses"... and the link is
here.

And this just in... Here's something else that will save the U.S. banks for another year. Apparently the FASB [Financial Accounting Standards Board] has stated that banks can delay [for up to one year] the implementation of a new accounting rule that will force the end to a manipulation banks have been using to hide risky assets known as SIVs [Special Investment Vehicles]. There may be up to a trillion dollars of SIVs that are affected. I thank reader P.S. for sending this to me in the wee hours of this morning... and the link to the article posted at seekingalpha.com is here.

And lastly... GATA had a release yesterday regarding an interview over at King World News... and the preamble went as follows... "Jim Sinclair, CEO of Tanzanian Royalty Exploration Corp. and proprietor of JSMineSet.com, has just given an excellent and wide-ranging interview to Eric King of King World News. They discussed the gold and dollar markets and the Federal Reserve's effort to rig markets through management of perceptions and suppression of interest rates, among other things. The interview is about 35 minutes long"... and the link is here.

Well, it seems obvious that this bullion bank-inspired correction still has a ways to run. These guys are about as subtle as a brick through a plate-glass window. The only questions remaining are... how low will they take the price and how long will it take to get there? I don't know... is the answer I have to both. The open interest in both gold and silver is still pretty grotesque... and as I [and Ted Butler] have said before over the last couple of months... it could get ugly. But can they... or will they? We'll just have to wait and see.

The graph below is the 3-year U.S. dollar chart. It's rapidly approaching overbought... but look what happened when it approached 'rapidly overbought' in 2008! Are we in for a repeat of that? Don't know that either.

Here's the 3-year gold chart. The RSI trace is approaching oversold... and the MACD line is plunging. You can read into this whatever you like. The silver chart looks somewhat similar... and astonishingly... the current RSI for both gold and silver are identical at 39.58!!! What are the odds of that occurring? Just asking.

I note that there wasn't much action in Far East trading in the precious metals earlier today. Gold is up around five bucks going into the London open... and silver's up about a dime. Gold volume [at 5:07 a.m. New York time] is a reasonably large 22,746 contracts... and silver volume is a miniscule [by comparison] 3,297 contracts.

So, we wait and see what the "Ben and Timmy" show brings, when the bullion banks show up for trading on the "CRIMEX" this morning.

I hope your Tuesday goes well... and I'll see you here tomorrow.