Another Mysterious IMF Gold Sale

From the Far East open... and up until an hour after London opened yesterday... about eleven hours in all, the gold price was down less than five bucks. This was against the backdrop of a relentlessly rising dollar. But around 9:30 a.m. in London, gold caught a bid, which continued into New York trading until shortly before 9:00 a.m. Eastern time when the price went vertical to its high of the day at $1,193.30 spot. Then the U.S. bullion banks pulled their bids. There was a brief moment of stability at the London p.m. gold fix... but then the tech funds once again found themselves selling into a vacuum.. and the price fell like a stone. By the time the smoke cleared... and despite a dollar that was up well over 100 basis points at one time... gold was only down a bit over ten bucks. The low of the day [$1,166.20 spot] was at the close of Comex trading.

And now for silver. As Ted Butler keeps harping on... and he's absolutely right... silver is at ground zero of the precious metals universe for the bullion banks... especially for the 'four or less' traders, whom I believe to be JPMorgan, Bank of Nova Scotia, HSBC USA... and Deutsche Bank. But JPMorgan's short position dwarfs the other three. As of the April 27th Commitment of Traders report, the four largest traders held almost 52,000 contracts net short. This is equivalent to 260 million ounces of the stuff. And, according to Ted... "the portion of the Comex silver short position held by JPMorgan, is indicated at roughly 150 million ounces of that 260 million ounces."

This is why the attack on silver was so vicious. These bullion banks are making every attempt to cover their short positions... and attacks like these are all they can do... as they have no metal to deliver. They are naked short. I noted yesterday that SLV couldn't even come up with 15 million ounces that they were owned... where in the world do you think that 260 million ounces is going to come from that these '4 or less' traders are short? You will note, that despite a dollar that was up over 100 basis points yesterday, that silver opened in New York only a dime below it's Monday afternoon close. The attack on silver came at the same time as the attack on gold, platinum, palladium, oil... the works. By the time New York trading was over, silver was down almost a dollar... and was down $1.01 from it's opening high of $18.80 spot, to it's New York low of $17.79 spot.

Here's the dollar graph for Tuesday... up about 130 basis points from the beginning of Tuesday's trading day in the Far East until the close of trading in New York at 5:15 p.m. Eastern time yesterday afternoon. It was up over 60 of those basis points at 9:00 a.m. in New York when the bullion banks pulled the pin... and gold was already up over $10 from Monday's close... but silver was down about a dime. All of this despite a rapidly appreciating greenback. It should be obvious, dear reader, that both gold and silver are now currencies in their own right... and you should own lots of them... plus the shares of companies that mine them.

I mentioned in my Tuesday commentary that I was alarmed at the price action of the precious metals shares on such a strong day for both the metals and the general equity markets. I also mentioned that this might be a precursor for a bear raid by the U.S. bullion banks... as the traders who are doing the dirty [and their pals that are in the know] dump their shares before the waterfall declines in prices begin. Well, that worked out just about on the money. The thing that surprised me is the fact that they didn't do it on a Wednesday, because all of yesterday's trading activity [if it's all reported in a timely manner that is] will be in Friday's Commitment of Traders report... and 'da boyz' normally like to hide their tracks. Obviously that was not in the cards this time.

Anyway, despite the hammering that the general equity markets took yesterday, the HUI recovered most of its losses as the day wore on... and only finished down 0.80%. Some of the large cap gold stocks actually finished up on the day! I was a very happy camper about this. However, a lot of the juniors... and virtually all of the silver companies [small, medium and large]... got slaughtered.

Now for Monday's open interest numbers. Gold's o.i. was up another 5,602 contracts. Volume was a very small 91,887 contracts. Total gold o.i. rose to 550,942 contracts. Silver's open interest was also up... but only a smallish 603 contracts. Volume was also very light... only 24,144 contracts. Silver's total open interest checked in at 124,819 contracts. There are still 1,047 contracts open for May which have yet to be delivered... plus whatever else is added as the month of May progresses.

Needless to say, open interest figures for Tuesday's trading 'action' should be quite interesting. However, you should know by now, that these bastards at the bullion banks are quite clever at hiding their tracks by going long in lieu of covering shorts... so be prepared for any sort of number. I am. But at least whatever numbers are reported later this morning will in Friday's COT report.

The CME Daily Delivery report showed that 32 gold and 493 silver contracts were posted for delivery on Thursday. In silver, the big issuers were JPMorgan, Bank of Nova Scotia and Prudential. The big stoppers were JPMorgan and the Bank of Nova Scotia. All the action is linked here. There were no changes reported by either GLD or SLV. The U.S. Mint reported their first sales for the month of May... 2,500 one-ounce gold eagles, 2,500 24K gold buffaloes... and 200,000 silver eagles. The Zürcher Kantonalbank in Switzerland posted their update for last week in all their precious metals ETFs. In gold they showed an increase of 33,227 ounces... and in silver it was up 504,473 troy ounces. I thank Carl Loeb for those numbers. The Comex-approved depositories showed an increase in their silver stocks of 539,894 ounces.

According to the usual New York gold commentator, the European Central Bank's weekly statement of condition showed that, once again, there was no change in "gold and gold receivables" for the week that was. "The bulliondesk.com has a report quoting the Bombay Bullion Association to the effect that April imports into India were 35 tonnes. This news is being spun negatively, being the first negative month against 2009 this year... but Indian imports YTD are 75% above 2009. Perhaps, more important, this is 5 tonnes above the BBA's upper range estimate in late April."

I have four gold-related stories today. The first is a GATA release headlined "China, the gorilla in the Third Gold War". Chris Powell, GATA's secretary treasurer, does an admirable job of writing a preamble to the piece, so I won't waste my time or yours writing one of my own. The link to this must read story is here.

I don't have a Goldman Sachs story today... but I do have one about Greece. The fallout from the proposed budget cuts is causing wide-spread demonstrations in the streets of Athens and other Greek cities. This is a Bloomberg piece from reader Craig McCarty... for which I thank him. The headline reads "Greek State Workers Escalate Protests at Budget Cuts"... and the link is here.

The next story is also from Bloomberg... and it was filed from Sydney this morning. This one is courtesy of Washington state reader, S.A. Despite what has been said by a lot of main-stream commentators, Australia is up to its neck in debt. If/when this commodity boom ends for them, things won't be as swell as they seem to be now. Why do you think the Australian government is proposing increasing taxes by 40% on Australia's mining industry? They're broke, that's why. The headline reads "Australian Bond Risk Surges Most in 10 Months on Debt Fears"... and the link is here.

I have another gold story that just arrived in my inbox in the wee hours of this morning. It's from this mornings edition of the United Arab Emirates Business 24-7 website. The headline reads "Commercial banks buy gold to meet demands"... and the link is here. Nice picture, too.

Here's a cute Bill Clinton moment. He lets it slip out that most of today's problems in the U.S. were caused by off the gold standard in 1971... but covers his butt shortly after that. The comment comes in the first couple of minutes of this short C-SPAN interview. It's imbedded in a short piece over at lewrockwell.com... and is titled "Bill Clinton Praises the Gold Standard". I thank Washington state reader S.A. for sending me the story... and the link is here.

The next story was posted over at The New York Times a couple of days back. This one is about what's currently going on in one of the next European dominos that's about to fall... and that's Spain. Bailing out Greece is one thing... but Spain is a horse of an entirely different colour. The headline reads "Spain Seen as Moving Slowly on Financial Reforms". I thank reader Roy Stephens for sending it along... and the link is here.

Here's a graph [from the May 1st edition of The New York Times] that's been making the rounds the last 24 hours... and it's definitely worth spending a few minutes on. The graph is headlined "Europe's Web of Debt". Banks and governments in these five shaky economies owe each other many billions of euros — converted here to dollars — and have even larger debts to Britain, France and Germany. Arrow widths are proportional to debt amounts. It would be of great interest to see what Britain looks like in the context of these five countries... but, alas, that data isn't provided here. But what is here, is bad enough. Note Spain vs. Greece... which I commented on in the previous paragraph. The link to the whole article... and the full-sized graph... is here... and I thank reader Brian Clark for sending it along.

Lastly, is my headline story of the day. It's another GATA release about IMF gold that also deserves your attention. Chris Powell's preamble says it all... so you should get right to it. The headline reads "Another mysterious IMF gold sale -- plugging the London leaks?" This is another must read... and the link is here.

The discomfort of discipline is trivial to the agony of regret. - Author Unknown

Yesterday's destruction across the precious metals complex should be seen for exactly what it was... a blatant attempt to get investors to stay away from the precious metals and other commodities while the Dow was getting buried. But, as I said yesterday, the bullion banks also wanted to harvest the low-hanging fruit, ring the cash register, plus cover as many short positions as possible... especially in silver. They were successful on all counts.

At the moment [5:30 a.m. Eastern time] both gold and silver are still below their New York closing prices of last night... but are struggling valiantly upwards now that London has opened. It's too soon to say whether this was a full scale attack on both gold and silver... as not enough days have gone by. But no matter how much they huff and they puff... the '8 or less' bullion banks are still going to be naked short a mountain of silver that doesn't exist in the real world. According to Ted Butler in a private letter to clients on Monday, the last COT shows that the '8 or less' bullion banks were short 48.5% of the total world production of 680.9 million ounces, which works out to around 177 days of production.

And the CFTC can't [or won't] do anything.

Gold has traded 21,000 contracts at the moment. Silver volume is pretty heavy, as it's already over 8,400 contracts. That's a big number for this time of day, dear reader. The CME has posted preliminary volume figures for Tuesday's trading. They show that gold traded a huge 202,960 contracts... less about 10,000 roll-overs. Silver's volume was also very chunky... 57,720 contracts... less a couple of thousand roll-overs. There was massive technical fund long liquidation yesterday... but how much of that shows up in the open interest numbers later this morning remains to be seen.

Without doubt, New York trading will be volatile... and it should tell us a lot about the intentions of the bullion banks. Is there more pain to come... or is this the best they could do? Can they... or will they... that's always the question. And the answer to all those question is... I don't know.

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