The Bullion Banks Go Short Another 24.3 Million Ounces of Silver

Well, as I mentioned in my closing comments in my column yesterday, the gold price rolled over the moment that the London a.m. gold fix was in at 5:30 Eastern time on Friday morning... 10:30 a.m. in London. From there it didn't do much until exactly 8:30 a.m. in New York when the selling pressure resumed. The low of the day was about 12:40 p.m. at $1097.70 spot. From that point, gold traded sideways for the rest of the New York trading session. The high price of the day was at the London a.m. gold fix... around $1,119 spot.

The price action for silver was the same as for gold... although the high price for day looked like a tie, as the silver price hit $17.35 the ounce at the London a.m. gold fix... and at 8:30 a.m. in New York... just moments before the bullion banks began selling off both metals in earnest. Silver's low price was at the same time as gold's... with the low price of the day reported as $16.94 spot at 12:40 p.m.

The dollar fell about 43 basis points during the rally in both gold and silver during Hong Kong's afternoon trading session... with the dollar's low occurring precisely at the London a.m. gold fix. Coincidence? I think not.

The shares pretty much followed the precious metals price 'action'... with the HUI down a smallish 0.88%... which, once again, I found mildly encouraging.

Open interest changes for Thursday's trading day were pretty much as expected... o.i. was up in both metals, but not by a lot. Gold o.i. rose 2,781 contracts on volume of 171,299 contracts... and silver open interest rose a smallish 605 contracts, with 32,203 contracts traded. I would expect that we'll see some declines in open interest reported for Friday's trading when they're posted on Monday morning.

The Commitment of Traders report was a huge disappointment... especially in silver. It was discouraging to see that the bullion banks had increased their net short position by a huge 4,859 contracts... which translates into 24.3 million ounces of silver. The '4 or less' traders [bullion banks] are still net short more than 50% of the entire Comex silver market... and the '8 or less' traders are net short two thirds of the Comex silver market... so nothing's changed there. The link to the full-colour COT report for silver is here.

In gold, there were no changes worth mentioning in the bullion banks' net short position since the previous reporting week. And my back-of-the-envelope calculations show that the '4 or less' bullion banks are net short about 45% of the entire Comex gold market... and the '8 or less' bullion banks are net short 57% of the entire Comex gold market. The link to the full-colour COT report for gold is here.

Since it's Saturday... silver analyst Ted Butler had his usual weekly interview with Eric King over at King World News... and I urge you to stop this minute, dear reader, and listen to what he has to say. The link is here.

The CME's Daily Delivery Report yesterday showed that 114 gold and 301 silver contracts were posted for delivery on Tuesday. Most of the issuers and stoppers were the usual suspects/bullion banks. You can check it out for yourself here. Neither SLV nor GLD had anything to say for themselves on Friday... and the U.S. Mint added another 2,000 one-ounce gold eagles to their sales figures for March, bringing their monthly gold eagle sales total up to 39,500. No silver eagles were reported sold... probably because they don't have any to sell. Month-to-date, silver eagle sales are sitting at 1,175,000. It was another busy day at the Comex-approved warehouses, as they reported receiving another 816,696 ounces on Thursday. Once again there was activity at all warehouses... and you can check it out here.

I have quite a few stories again today, so I'm glad it's the weekend... and hopefully you can find the time to spend on them. The first is from reader Scott Pluschau... and it's posted in the Financial Times in London. The headline reads... "S&P warns over America's top-tier rating"... "The AAA rating of the US is at risk", S&P has warned, unless the country adopts a credible medium-term plan to rein in fiscal spending." It's a short article with an excellent graph... and it's worth the read. The link is here.

The next story is from Toronto's Globe and Mail... and was posted late last night. It's about how Lehman imploded. A lot has been written about this already, but I found this version of it succinct and to the point. The headline reads "Lehman report gives weight to lawsuits". The "document details alleged financial manipulation in the largest ever U.S. bankruptcy; bank shifted billions to make its debt appear smaller." It's not a particularly long article... and I feel that it's worth your time. I thank reader Roy Stephens for bringing it to my attention... and the link is here.

Before getting to my final two must read stories of the day, I've got three very informative oil-related stories for you. Two of them are videos, actually. The first is a serious [and longish] story from the March 8th edition of The New York Times. It adds fuel to the 'peak oil' camp [of which your humble scribe is a card-carrying member]. "Oil production in its aging fields is sagging so rapidly that Mexico, long one of the world’s top oil-exporting countries, could begin importing oil within the decade." ["could"... try the word "will" instead - Ed] "Output from Mexico’s giant Cantarell field, in shallow waters near the eastern shore, has plunged by 50 percent in recent years. Output at the country’s other large field is expected to begin falling in the next year or two." The headline reads "Mexico Oil Politics Keeps Riches Just Out of Reach"... and I urge you, dear reader, to give this article the time it deserves. Click here.

The next item is the first of two videos on the subject of oil that I have for you. This one was sent to me by reader Roy Stephens and the video bears the title "Uneven Terrain: Oil of L.A."... and is posted over at en.video.canoe.tv . "Twenty million barrels of oil sit beneath Los Angeles. Hidden in plain sight, thousands of wells pump day and night all over the city... covered by hollow office buildings, camouflaged next to high schools, and concealed behind shopping malls. I knew that there were oil wells in L.A... but I had no idea of the scale of it. It's enormous! Therefore, I urge you to watch this video documentary, which runs for a hair over nine minutes... and the link is here.

And lastly in this trio of oil stories, comes this video about horizontal drilling. I have a close friend in the oil patch who has been working the rigs for about 40 years... and the technology behind it is unbelievable. This is the sort of drilling they would be using in Los Angeles. Reader Peter Handley sent me this video way back on February 22nd... and I've been saving it for just such an occasion... so be prepared for an education yourself. The video, entitled "Crude Oil Horizontal Shale Drilling", is posted at northernoil.com... and the link is here.

By the way, if energy is your bailiwick... I urge you to consider subscribing to Casey's Energy Opportunities. Everyone at Casey Research is the 'peak oil' camp... and this publication would be well worth investing in. It costs nothing to check it out at the link above.

Now I return you to our regular programming....

The next item was sent to me by Australian reader Wesley Legrand. He was kind enough to send me an essay from my own back yard. It's from Sprott Asset Management... and is Eric Sprott and David Franklin's latest monthly "Markets at a Glance" commentary. This one is entitled "It’s Déjà Voodoo Economics... All Over Again"... and I'm sure they've offered quiet apologies to Yogi Berra as well. As always, these thoughtful essays are a must read from one end to the other... and this one is no exception. The link is here.

And lastly comes another must read. With the CFTC's precious metals inquiry convening in Washington on March 25th, silver analyst Ted Butler has filed his March 9th commentary in the public domain. He explains, once again, the silver price suppression scheme -- and the matter of the concentrated short positions held by JPMorgan et al. The essay is entitled "Answering the Skeptics"... and the link to this essay, posted over at silverseek.com, is here.

The American people will never knowingly adopt Socialism. But under the name of 'liberalism' they will adopt every fragment of the Socialist program, until one day America will be a Socialist nation, without knowing how it happened. - Norman Thomas [1884-1968] six-time U.S. Presidential candidate for the Socialist Party of America

Today's 'blast from the past' reminds me of the TV series = no matter how I try not to think about it. Just about everyone should know this piece, so turn up your speakers and click here.

Before I get into my closing commentary, I've had the following video sitting in my in-box for about a month... and it was too fantastic to zap without sharing it with you, dear reader... so here it is. The last space shuttle blasted off on February 11th. As it ascended, the shock waves [completely visible in this video] destroyed a bright, rainbow-coloured sundog. It was astonishing and delightful to watch. Turn up the volume on your speakers so you can hear the reaction of the crowd when the shock waves from the supersonic speed of the space shuttle hits the sundog. The video is posted on one of my favourite web sites... spaceweather.com... and the link is here.

Well, with the huge deterioration in the bullion banks net short position in silver during the current reporting week... along with the increase in their net short position in gold during the previous few weeks, I must admit that the case for another decline in price to test gold's 200-day moving average is looking like it might happen. Both options expiry for April gold... and the CFTC's hearings on precious metals... are less than two weeks away. I'll be watching the situation with some fear and trepidation. Here's the 1-year gold chart to put everything into a longer-term perspective.

So whatever happens during the balance of March won't shock me at all. We'll just have to keep an eye on what actions JPMorgan et al take between now and then. Whatever it is, we shouldn't have long to wait.

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