Beijing Residents Have Year-End Gold Rush

Gold was off and running the moment that trading began in the Far East on the day before Christmas... and by the time that the gold price peaked shortly after 10:00 a.m. in London [5:00 a.m. New York time]... gold had tacked on just about twenty bucks. The U.S. dollar put in a bottom at the London a.m. gold fix about half an hour later, but the gold price was already declining... and was down about $8 by 8:45 a.m. in New York trading on the Comex. This was the New York low of the day [$1,096.20 spot]. From that point, gold began a rally [despite a rising dollar] and closed on its high of the day at $1,1106.20 spot.

Silver's performance was similar... but not identical... to gold's. Silver also rose at the open in the Far East, but flat-lined around 2:45 p.m. in Hong Kong... and basically did nothing for the next six hours. Then it declined slightly into the New York open and bottomed [along with gold] at 8:45 a.m... before beginning to rally along with gold. Silver's high of the day was reported as $17.53 spot... and closed close to that at $17.47 spot.

The gold price matched the U.S. dollar's performance on the 24th pretty closely... up until the rally began at 8:45 a.m. in New York, that is... and even though the dollar continued to rise, it was obvious that there buyers were out and about. Whether it was new buyers or short covering remains to be seen. Hopefully the final CME open interest numbers will shed some light on that later this morning.

Needless to say, the volume on Thursday was extremely light. The preliminary numbers from the CME show that gold's volume was a bit over 68,000 contracts... and silver's volume was a miniscule 9,300 contracts. Based on these numbers, I'm not inclined to read too much into Thursday's price action... and I don't think you, dear reader, should either.

The shares could not catch a bid... and when they did, there appeared to be someone there to sell it off to basically unchanged every time the shares tried to rally. Very strange.

Today is the day for the Commitment of Traders report... which will be released at 3:30 p.m. Eastern time this afternoon. I'll report on it tomorrow, but if you can't wait, the link is here. Hopefully this report will shed more light on the 'Alice in Wonderland' situation that currently exists regarding the grotesque readings of the COT reports lately.

Thursday's CME's Daily Delivery Notice showed that 85 gold and 25 silver contracts are due for delivery tomorrow. There were no reported changes in either the GLD or SLV ETFs. The U.S. Mint had a report saying that another 44,500 ounces of gold disappeared into their gold eagle program... and a smallish 47,000 silver eagles were also reported sold. Both Ted Butler and myself are expecting some really big sales numbers to be reported by the U.S. Mint on or before December 31st... especially in silver eagles. And lastly, the Comex-approved warehouses indicated that 108,662 ounces of silver were withdrawn from their collective inventories on December 23rd.

Despite the fact that it a very long holiday weekend, there was still a lot of news that you might want to skim... or read in their totality. Because of the sheer number of them, I'll just provided the headline and the link and you can click on whatever interests you. And, except for the last few stories, all of them are precious metals related in form or another.

1. Tales of woe ring true in L.A. jewelry district. [Credit: Mike Priwer]
   
2. U.S. judge backs return of $500 million coin haul to Spain. [Credit: Donna Badach]
   
3. SEC clears way for platinum and palladium ETFs.
   
4. Asia's Central Bankers Say It With Gold.
   
5. Beijing residents in gold rush at year end.
   
6. Adjusted for inflation, Dow's gains are puny. Lots of gold comments in the last five paragraphs.
   
7. Dollar won't do anymore, FT's Martin Wolf says, without mentioning gold.
   
8. Treasury pledges unlimited bailouts for Fannie and Freddie.

This next piece is the long story of the day. It's from the December 24th edition of The New York Times. Writer Gretchen Morgenson is co-author of this article which basically shows how the Wall Street firms set up mortgage-related securities... and then shorted them... because they already knew in advance that they would fail spectacularly. The title pretty much say it all... "Banks Bundled Bad Debt, Bet Against it and Won". The link is here.

The next story is from Sunday's Washington Post. You may remember that North Korea dropped a surprise currency revaluation on their citizens earlier this month. Well, it appears that everything didn't go 'according to Hoyle'. "Grass-roots anger and a reported riot in an eastern coastal city pressured the government to amend its confiscatory policy. Exchange limits have been eased, allowing individuals to possess more cash." This is a very interesting story... and gives us a peek into a country that we in the west hear little about, so if you have the time, it's worth the read. The headline states "In N. Korea, a strong movement recoils at Kim Jong II's attempt to limit wealth". I thank Florida reader Donna Badach for sending it along... and the link is here.

And lastly, is this. We all know that the silver and gold markets are managed... as are a lot of other markets... the US$ and the bond markets being two more. But the U.S. equity markets are also managed in a big way... and have been for a couple of decades. This story is about that very thing... it's courtesy of the December 24th King Report... from which I will quote extensively... "For months we have noted the pattern of goosing SPHs during European trading. This is an opportune time for gaming because most US traders are asleep with visions of sugar-plum fairies racing in their heads. So the SPH market is very thin."

"The pattern has US day traders, HFTs [High Frequency Traders - Ed] and the usual suspects pouring into stocks on the open and in the early going. Then stocks tend to chop sideways until last-hour SPH gaming and VWAP [Volume-Weighted Average Price - Ed] roulette."

"ZeroHedge.com has noticed the pattern too: …all the upside since September 14th has come exclusively from after hours action. The charts demonstrate the relative performance of regular hour trading in the SPY as well as that in the extended session. The notable observations: gaps, gaps, gaps. Every single day, minimal volume pushes the futures index higher. Good news, bad news, it don't matter to the Goldman S&P and Russell 1000 futures desk: they just lift every micro offer, giving the impression that the market is unstoppable, often leapfrogging each other as the latest viagra'ed GDP or unemployment rumor is spread. Come morning, it is time for the HFT brigade to come in and scalp their trillions of pennies while leaving the market unchanged, then at 4pm handing it off again to leveraged futures manipulation and dark pools. In a nutshell, this is the secret of the past quarter's phenomenal market performance." The headline reads "A Three-Month Flat Market? Yes... If You Exclude the Constant After-Hours Manipulation"... and the link is here. This story, along with its excellent graphs, is well worth your time. It's not a long read, either.

We've got less than four trading days left in 2009. Starting today, there's the little matter of the U.S. Treasury and the $118 billion in new paper it's got to 'sell' this week. Also is the out-of-this-world Commitment of Traders Report... and the grotesque short positions in both gold and silver they show. So... how will this week shape up, you ask? A good question for which I [and everyone else] has no answer.

Then there's the matter of the U.S. dollar. The graph shows that the dollar is now overbought and due for some sort of correction. Will it fall to news lows from here... or power higher once the overbought condition is worked off? Another good question with no answer.

Gold and silver are both up a bit in Monday morning trading in the Far East. London has just opened as well... and nothing exciting is happening their either. Volume is not overly heavy in gold [but still pretty big for this time of day] at 18,791 contracts... and silver is lagging far behind at 2,528 contracts [at 3:57 a.m. Eastern]. This volume would not be local traders in either Sydney, Hong Kong or London... but the U.S. bullion banks operating in the Globex access market... which they can trade in virtually 24 hours per day.

It could be an interesting week as we close out the first decade of the 21st century.

See you tomorrow.