Russia's Central Bank Purchases 1.1 Million Ounces of Gold in May

Pricewise, gold didn't do a lot on Friday until Hong Kong closed for the weekend. Then a rally began in London that really gathered some upside momentum about 45 minutes before New York opened. There was a minor peak around $1,260 spot shortly before 9:00 a.m. Eastern time... and then gold got sold off a hair going into the London p.m. gold fix at 3:00 p.m. London time... 10:00 a.m. in New York. Once the 'fix was in'... gold worked its way quietly higher until it's absolute peak price of the day [$1,263.50 spot] around 12:15 p.m. Eastern.

The gold price then got sold off exactly $8 from that high price... and it closed New York electronic trading at $1,256.50 spot... up $11.30 from Thursday's close. This was a new record high closing price for gold.

According to the LBMA website, the London silver fix is around noon local time... 7:00 a.m. in New York. The silver price was comatose on Friday up until what might have been an early silver fix shortly before noon in London... as these gold and silver fix times are not cast in stone to be done precisely on the hour... or half hour... as the case may be.

Anyway, from that point, silver added about 45 cents up until shortly before 9:00 a.m. in New York... then down a bit into the London gold fix... then up again to its absolute high price of the day [$19.30 spot] at precisely 12:00 noon in New York. Silver then sold off a bit going into the close.

Here's the New York spot silver chart... and my definition of "precisely 12:00 noon" for silver's high price tick. As I've stated many times over the last couple of years, there's no chance that these precise changes... whether they be gold, silver, the Dow, or the dollar... can be random market events. As GATA's secretary treasurer Chris Powell said more than two years ago... "There are no markets anymore... only interventions."

Here's the dollar chart... which I [once again] provide for entertainment purposes only. It's obvious that the dollar 'activity' yesterday had absolutely no effect on what was going on in the precious metals market.

For the second day in a row, most of the major moves in both the silver and gold price were baked in the cake by the time the New York equity markets opened Friday morning. The high in the HUI was around the noon highs for both metals... and the sell-off in the gold price after 12:15 p.m. Eastern time had virtually no impact on the gold shares at all... and the HUI finished up 2.26% on the day.

Here's this past week's HUI graph. It was an impressive week... and the gap openings on Thursday and Friday stand out like sore thumbs.

Options expiry for the July contract is on Monday, June 28th. The 29th is last notice day for delivery into the June contract... and the 30th is first day notice into the July silver contract. So, it will be an action-packed last three days of June. We're seeing lots of activity in roll-over and spreads as there are only six business days left before this all this comes to a head.

The CME Delivery Report for Friday is hardly worth mentioning... 9 contracts in gold and one in silver were posted for delivery on Tuesday. Neither GLD or SLV had a report yesterday. The U.S. Mint reported that 9,500 ounces of gold disappeared in their gold eagle program... and no sales were reported for anything else. The Comex-approved depositories reported that another 600,295 troy ounces of silver were withdrawn on Thursday. This time it was all from the Scotia Mocatta warehouse. The link to the action is here.

One of the things that both Ted and I talk about... and I've posted here every day in this column... is the frantic in-and-out activity in the silver depositories on the Comex. Yesterday, in an essay to his subscribers, Ted had this to say about the current situation... "The other thing I’ve been focused on is the heavy turnover, or high volume of COMEX silver warehouse movements. The movement, both in and out, of silver inventories has been nothing short of frantic for the past few weeks and months, even though overall inventory levels have remained fairly stable. In my mind this confirms that the silver on deposit at the COMEX is not available for sale and new stuff must be brought in to satisfy the demands of those seeking to remove COMEX silver. The turnover has been averaging close to 25% or more [often much more - Ed] of all the silver produced daily in the world. In my experience, that’s unprecedented. This silver turnover is in sharp contrast to the movement of COMEX gold or copper inventories. It tells me that the wholesale silver market is as tight as a drum."

You can find out more about Ted's work at butlerresearch.com.

The new Commitment of Traders report [for positions held at the close of trading on Tuesday, June 15th] was issued at its usual time yesterday. Both Ted and I had been watching the open interest build up in both silver and gold all during this time period... and I was greatly relieved to see that when the actual numbers came out, they weren't nearly as bad as we were both expecting.

Silver's net short position did increase... but only by 1,737 contracts in total. The Commercial category [where the bullion banks hide] net short position currently sits at 268.9 million ounces. The '4 or less' bullion banks are short 256.2 million ounces of that... and the '8 or less' bullion banks are short 323.7 million ounces of silver... which translates into 138 days and 175 days of world production respectively. So, it's obvious that if these 8 bullion banks weren't there, the other traders in this category are massively long the silver market... and the silver price would be many orders of magnitude higher than they are now.

In gold, the net short position of the bullion banks only increased by 5,367 contracts... practically nothing in the grand scheme of things. The Commercial category [where all these bullion banks hide] net short position sits at 27.9 million ounces. The '4 or less' bullion banks are short 22.5 million ounces of that... and the '8 or less' traders are short 28.8 million ounces. So, if these eight bullion banks weren't there, the Commercial category would be slightly net long.

The link to yesterday's COT report is here.

I didn't talk to Ted Butler at all yesterday... and have no idea what his weekly interview with Eric King over at King World News will have in it. But I urge you to stop reading at this point, and listen to what he has to say. The link is here.

I only have a couple of gold-related items today... and the first is the headline for today's column. There are no stories about it on the international wire services yet... but I have the gold reserves page of The Central Bank of the Russian Federation bookmarked. On Friday they updated their gold reserves for the month of May, and they show an increase from 21.5 million to 22.6 million ounces in one month. I mentioned in May, when they updated for April, that I was expecting a far bigger number than the 200,000 ounces they reported back then. Well, it finally showed up in May. The 1.1 million ounce purchase is their biggest one month increase, ever. Year-to-date, the Russian Central Bank has added 2.1 million ounces of gold to their reserves. Here's the updated graph. I thank Richard Nachbar and his fearless computer genius, Susan McCarthy, for providing it for our viewing pleasure.

Here's another graph... this one courtesy of Nick Laird over at sharelynx.com. It shows the 1979/80 gold 'bubble' compared to how our current 'gold bubble' is doing. You can see from this graph that our current 'bubble' is laughable by comparison... it's hardly even started.

Nick also provided a similar graph for silver... and here it is.

I'm glad it's the weekend, because as I warned yesterday, I have lots of reading material for you today... and my only hope is that you'll find the time to go through it over the next couple of days... as it's all worth your while.

The first story is a Bloomberg piece filed from Moscow in the wee hours of this morning. In light of how much gold is pouring into Russia's Central Bank's vaults... this story is more than just fluff. The headline reads "Medvedev Pushes Ruble Reserve Currency to Cut Dollar Dominance". Both Putin and Medvedev have had their pictures taken holding gold bars in their hands... and you can read into that whatever you want, dear reader. The link to the story is here.

Here are the other stories about Iran that I mentioned yesterday that I was saving for today. All of them are courtesy of reader, Roy Stephens... for which I thank him. The first piece was in the June 16th edition of The New York Times. The headline reads "Iran Tests Iraqi Resolve at the Border". It's less than a 5-minute read... and the link is here.

The second article on Iran is far more substantial... and is seven pages long. It's posted at the English language website of the German newspaper spiegel.de. The title to the essay reads "The Birth of a Bomb: A History of Iran's Nuclear Ambitions". Needless to say, it's something that you should read from one end to the other... and the link to the story is here. The story was originally published in two parts... but both parts are combined at the link given.

Here's the last offering from reader Roy Stephens today. This one's about the BP debacle in the Gulf of Mexico... and it's posted over at the energyandcapital.com website. The headline says it all... "BP's Quest for Time: The Well from Hell... And What They're Not Saying". This is another must read article... and the link is here.

Here is my second long read of the day for you. This story is written by one of Mexico's richest men... and one who has been at the forefront of returning silver to its rightful role as money in his native Mexico. He's been at it for decades. His understanding of the role of a gold [or silver] standard is complete. The essay [posted at plata.com.mx] is entitled "The gold standard: generator and protector of jobs". I thank reader Al Conle for sending it along earlier this week. The story is available in either Spanish or English... and the link to the English version is here.

My last 'today' is another excellent interview that's posted over at King World News. It's with the highly regarded [at least by me] John Hathaway. John is senior managing director and portfolio manager of the Tocqueville Funds. No flies on him at all... and I'm always interested in what he has to say. It's a must listen... and the link is here.

Yesterday I ran the Tuesday edition of The Daily Show with Jon Stewart. Here's the Wednesday edition of the same show. Jon rips Obama's oil spill speech to shreds. It's in three parts and they all run consecutively. The link for Canadian readers is here... and the rest of the world can click here.

Today's 'blast from the past' is a little something from the 1970s... which is more than 30 years ago now. What happened to all that time? Turn up your speakers and click here.

Well, with the gold price back in record territory, one must wonder out loud whether or not the 'summer doldrums' are going to apply this year. With the entire world's economic, financial and monetary system circling the drain ever faster with each passing week... I haven't changed my position one bit. I'm still 'all in'.

The charts from Nick Laird... and the interviews with both Ted Butler and John Hathaway above... along with the Russians socking away every bar of local gold production, says that the end game is fast approaching.

I've been cheek-to-jowl with the gold and silver market for the past ten years... and I can just smell it now.

The only thing to ponder is the time frame. Next week, next month... or next year? Who knows... and who cares? But it doesn't matter any more... as I'm going to ride this wave to the very end.

And, with the gold and silver shares poised for a break-out to the upside, the opportunity still exists to get on board this train before the thundering hoards show up. I'm still urging you to consider an investment in a subscription to either Casey's Gold and Resource Report... or Casey Research's flagship publication... the International Speculator. Not only will fortunes be made... but there's also the little matter of wealth preservation and currency debasement to consider as well. It costs nothing to click on the links and check them out. Don't forget, dear reader, that our usual 100% satisfaction-guaranteed-or- your-money-refunded policy is in effect.

Enjoy what's left of your weekend... and I'll see you on Tuesday.