Commercial Traders Are Mega-Short the U.S. Dollar

Gold's low on Wednesday [around $1,116 spot] occurred shortly after trading began early in the morning in the Far East. From there the price rose about five dollars or so... and basically sat at that price until the Comex opened in New York. Starting at 8:15 a.m. gold began a stair-step sort of rally to it's high of the day [$1,141.10 spot] which occurred after the Comex close. Then, gold basically flat-lined until the 5:15 p.m. close.

Silver opened in early Far East trading on Wednesday morning at its low of the day... then rose about 15 cents... and then spent the next 10 hours hovering within a dime of $17.90. But at 8:15 a.m. in New York, silver also began to rally... and basically closed on its high of the day... which was around $18.25 spot.

The shares had another wonderful day, but despite the strong closes in both metals, the shares did not finish anywhere near their highs... as they got sold off in the last hour of trading.

Gold open interest for Tuesday showed that o.i. rose a smallish 1,068 contracts... which was a bit of a surprise considering that gold was on the defensive for virtually the entire day... and down about $4 at day's end. Final volume was reported as 178,259 lots... and gold's total open interest now stands at 507,643 contracts. In silver, open interest fell 229 contracts... which was also a bit of a surprise considering that the price rose on Tuesday. Volume was reported as 34,961 contracts... and total o.i. is 125,391 contracts. With such counterintuitive open interest activity, I'm starting to wonder how relevant this data is anymore. My thoughts on this would also include the Commitment of Traders. All of the data shown above will be in tomorrow's COT report.

Yesterday's CME Delivery Report showed that 70 gold and 15 silver contracts are up for delivery on Friday. In the first week of delivery into the January contract... 2,466 gold and 129 silver contracts have been delivered [246,600 ounces of gold and 645,000 ounces of silver]. The GLD ETF reported its second withdrawal of the week, as another 156,780 ounces were removed yesterday... and there were no reported changes in SLV. Ted Butler said that [based on this week's price action to date] he figures that the SLV is now owed a reasonable amount of silver... and it will be of interest to see how long it takes for them to get it. The Comex-approved depositories indicated that a tiny 1,898 ounces of silver left their warehouses on Tuesday.

The European Central Bank produced its first statement of condition for 2010 yesterday... and for the second week in a row, it showed that there were no transactions in gold for the week just past. As I mentioned several times, this price correction, which may [or may not] be over, is 100% "Made in the U.S.A."

I have a couple of gold-related stories today. Both are from commodityonline.com... and the first is headlined "Gold buying frenzy grips China". This is a very bullish story from one end to the other... but it's a bit of a read... and the link is here.

The second story is very bullish as well. The headline reads "Gold may gain 35% in 2010: Jeffrey Nichols."... "Investors can expect a gold bull market in 2010 while silver could outperform gold as was the case in 2009." This story is also worth reading and the link is here.

While we're talking about the gold price, here's a chart showing gold's performance over the last decade as measured against all the major fiat currencies.

The next story is one that I borrowed from Kitco. The headline pretty much says it all... "Palladium, Platinum ETFs Near Launch"... and the link is here.

The next story, entitled "$50,000 Reward in Theft of Bars", is about eight gold ingots that were stolen... and the owner wants them back. These gold ingots were part of the treasure recovered from the S.S. Central America, which sank in a hurricane in 1857 off the coast of North Carolina. It's a very short story... and the photo itself is worth looking at. I thank reader Donna Badach for sending it along... and the link is here.

Here's another graph offered with no commentary... as none is needed. I thank reader Ken Metcalfe for sharing it with us. Please study it carefully.

Here's a story/video that I didn't have room for yesterday, so here it is today. It's a posting over at lewrockwell.com with the heading "Gerald Celente Predictions for 2010" Celente had nothing good to say in his forecast for America in 2009... "and, unfortunately, he seems to think that 2010 is not going to be the year for America either." This 3-part video has a running time of about 22 minutes in total... and I thank R. Bentley for sending it along... and the link is here.

One more chart. This one I stole from "Jesse's American Cafe". It doesn't need any explanation either.

As you well know, dear reader, Iceland was one of the first countries to go down the drain when its house-of-cards banking system imploded in 2008. Since then, Britain [and other countries] have been trying to get savings account holders lost deposits back. Well, that didn't work out as planned... and the Dutch government is livid. The story [with thanks to the King Report] is posted on the Dutch website rnw.nl... and the headline reads... "New Episode in Icesave Saga"... and the link to this must read story is here. Without doubt, this is a harbinger of things to come at quite a few banks throughout the world in small countries such as this.

Well, I'm finally down to the last story. The preamble is by Chris Powell, GATA's secretary treasurer... but before he get his two cents worth in, I just want to warn you in advance that parts of this essay will be over your head... but try to struggle through it as best you can. Heck, there are portions of this that even I don't understand fully. But the parts you do understand, dear reader, should make you rush out and buy as much physical gold and silver as you can afford. So, with that caveat in place, here's Chris.... "Reginald H. Howe, partner in Golden Sextant Advisors and litigator in the first gold price-fixing case, Howe vs. Bank for International Settlements, has just analyzed the latest precious metals derivatives report from the BIS and finds that they exploded in the six months ending last June 30. The gold and silver derivatives, Howe remarks, have lost any relation to possible gold production and again raise the question of whether real metal can be delivered against the claims that have been sold. Howe's commentary is headlined "Precious Metals Derivatives: Louder Music, Fewer Chairs," and you can find it at the Golden Sextant Internet site linked here.

Not many people know who Reginald [Reg] Howe is. I've had the privilege of meeting both him and his business partner, Bob Landis, on several occasions. I probably won't live long enough to encounter two more brilliant minds than these. GATA has been blessed to have associates of this calibre working on our side of the fence. Their respective bios are linked here... and are well worth noting. Bob Landis has just authored a work [published earlier this week] entitled "The Ascent of Hooey". It's a little on the long side for a weekday offering... so I'll be posting it in my Saturday column where you, dear reader, will be able to give it the time it deserves.

Around midnight I received an e-mail from Kentucky reader, Jim Long. The link he provided showed that the commercial traders in the U.S. dollar have gone mega-short... and are getting ready to clobber the dollar. Ted Butler has been talking about this situation since before Christmas, but I just kept forgetting to mention it in my column... until now. The link that Jim sent me is here... and I urge you to read it.

Well, there's nothing that I've read or heard so far this year that leads me to believe that gold and silver won't be the trade of the year once again. As you know, I'm "all in"... and I'm happy to be. But, as I've mentioned every time I say that, I'm always on the lookout for "in your ear". That may be the case in the short term... but I've lived and breathed gold and silver for more than 10 years now, so I'm not going to blown out of my position by any short-term negative price action. I just want to be there when the U.S. government and their bullion banks finally throw in the towel.

I note that not much happened during Far East trading earlier today. Gold is down a handful of dollars and silver is down about a dime... and I duly noted the vertical spike in the silver price [that promptly got capped] the moment that Hong Kong opened. London has just opened for trading and gold volume is already a substantial 27,695 contracts... with silver a pretty chunky 5,412 contracts traded [as of 4:43 a.m. Eastern time].

The CME has posted the preliminary volume numbers for Wednesday's trading. Gold volume shows around 203,500 contracts... and silver a hair over 38,000 contracts. I suspect that [based on the big price rises in both metals yesterday] open interest in both will be up another big amount. As I said before, the bullion banks are going short against all comers in an attempt to keep the gold and silver prices from exploding to the moon and the stars. Because, if they weren't there, the precious metals prices would be some astronomical number in very short order... and that's exactly what Reg Howe was alluding to in the last paragraph of his essay posted above.

See you tomorrow.