India Imports 35-40 Tonnes of Gold in January So Far

Gold's Wednesday high came in early Hong Kong trading once again... around $1,102 spot. From there it declined to around $1,095 and vacillated within $5 of that price until 11:30 a.m. in New York. Then, during the next 90 minutes, about $10 got peeled off the price... down to $1,085... and then the gold price basically traded sideways into the 5:15 p.m. close. The low for the day [which occurred in late afternoon electronic trading] was reported as $1,081.90 spot. Nothing to see here, folks...

Silver's high for Wednesday [around $16.95 spot] was at the same time as gold's... in early Hong Kong trading. It 'slid' from there, but bottomed out the moment that London began trading. The smallish rally that developed at that point had its legs knocked out from under it the moment that Comex trading began in New York. From there, silver struggled for the next few hours until it rolled over and hit its low of the day [$16.39 spot] shortly before 1:30 p.m. Eastern time.

The dollar was up and down yesterday, but to say that it influenced the precious metals prices would be a bit of a stretch. Here's the chart.

The precious metals stocks pretty much mirrored what was happening with the Dow... as the graphs were nearly identical. The only difference was that the Dow had another 'miracle' rescue at 2:30 p.m. and finished well into the plus column... whereas the HUI [although it recovered a bit] didn't... and closed down 1.07%.

Now for the open interest changes for Tuesday's massacre. In gold, the drop in o.i. was a smallish 2,045 contracts... but like I said yesterday, the bullion banks could have just as easily bought bunches of long positions that the tech funds were puking up, which would disguise the real net change in open interest. They may not have reported all their trades for Tuesday as well... and that would certainly have affected the open interest changes. But what was reported yesterday, will be in tomorrow's Commitment of Traders report... and then we'll find out for sure. Anyway, volume yesterday was a gargantuan 341,071 contracts... most of which would have been switches and spreads... as Tuesday was options expiry, and there's always a huge flurry of activity surrounding that. Volume should be pretty decent for the rest of the week as well.

What I said about gold above, applies even more to silver... where open interest was actually up 120 contracts. Considering how badly silver got hit on Tuesday, it's obvious that JPMorgan et al were buying every long that the tech funds were selling. They could have been covering short positions as well, but obviously bought more long contracts... or the open interest would have been a negative number. And, as I said above, Friday's COT report will tell all. Silver volume was 50,455 contracts.

Tomorrow is the last day of delivery into the January contract as we roll over into February. The CME reported exactly one gold contract and zero silver contracts are to be delivered on that date. For January... 2,893 gold and 292 silver contracts were delivered. In tomorrow's report, the CME will show what's up for delivery on first day notice for February gold... which is Monday, February 1st... and I expect some rather large numbers. There were no reported changes in GLD yesterday, but over at SLV they reported receiving 1,472,271 ounces of silver. Once again, there wasn't a report from the U.S. Mint... and the Comex-approved depositories showed that a smallish 64,911 ounces of silver was taken into inventory on Tuesday.

I seem to go from feast to famine when it comes to stories. I don't have many today... and I'm not sure who's happier about it... you or me! The first story is from The New York Times and is headlined "Two at Fed Had Doubts Over Payout by A.I.G." The link is here.

The next piece is courtesy of Russian reader Alex Lvov. It's very short, but it's my suggestion that you read every word. The headline is a stunner... "Suspending Money Market Redemptions Is Now Legal: SEC Approves New Money Market Regulation In 4-1 Vote." The story is posted over at zerohedge.com... and the link is here.

Here's a story that I borrowed from yesterday's King Report. It's a piece from The Telegraph in London. The headline reads "Britain at risk of plunging back into recession"... and the link is here.

This next story has to do with Japan's credit rating. In a Financial Times story in London comes this piece headlined... S&P cuts Japan outlook to 'negative'... and the link is here.

And lastly is this Reuters story filed from New Delhi yesterday. "India has imported 35-40 tonnes of gold during January 1-27... up from 9.8 tonnes in January last year... the head of a trade body and bank dealers said on Wednesday." It's not a long article, and it's definitely worth the read... and the link is here.

A pure gold statue of Buddha is displayed at the Ginza Tanaka store in Tokyo -- November 26, 2009. [Reuters/Yuriko Nakao]

Just looking over Far East trading early on Thursday morning, I see that the smallish rally in both metals that began in Sydney... ended at the Hong Kong open... and then ran into a dollar 'rally' which peaked out around 10:00 a.m. in Hong Kong. Both of these features are readily apparent on the gold and dollar graph at the top of this column. But other than that, neither gold nor silver is doing much of anything as I write these last few paragraphs. However, the dollar has rolled over and both metals are in positive territory and showing signs of life. It will be interesting to see how long this situation is allowed to last.

Gold volume [as of 4:31 a.m. Eastern time] is 26,073 contracts for April. Silver [JPMorgan's problem metal] volume is 5,222 contracts... which is more than decent.

Speaking of volume, the CME has posted the preliminary gold number for Wednesday's trading. It shows huge volume as well... 340,000 contracts... most of this was switches and spreads. Silver's volume was a more subdued 35,000 contracts.

Wednesday's trading wouldn't have resulted in much tech fund long liquidation or bullion bank short covering, because new low prices weren't set in either gold or silver... so I'm not expecting any big changes in open interest unless there's some spill-over from Tuesday's smack-down that wasn't reported on time.

Silver is starting to get into oversold territory, with the RSI currently sitting at 35.91. I also note that gold's 200-day moving average has snuck just above $1,010. Here's the 6-month silver chart that shows just how far along we've come in this JPMorgan-inspired liquidation process... and it's obvious that we're much closer to the end of this sell-off than we are to the beginning. The gold chart looks about the same. The end of this liquidation cycle can't come too soon for me.

The U.S. dollar chart is starting to look a little toppy. The dollar has broken through the 200-day moving average... and it will be interesting to see just how many more legs this rally has... as that will certainly determine when the bottom is in for both gold and silver.

The next couple of days trading in both precious metals... and the dollar... should tell us a lot.

See you tomorrow.