Gold's Rise to Become Disorderly: Ben Davies

The gold price didn't do a lot on Friday until London opened for trading at 8:00 a.m. local time... which is 3:00 a.m. in New York. From that moment, gold began working its way slowly higher... with a sudden spike to its high of the day [$1,321.80 spot] the moment after the London p.m. gold fix was in at 10:00 a.m. Eastern time. That spike was capped... and the gold price traded sideways for the rest of the day.

Silver's price path took a more circuitous route to it high of the day... $22.17 spot... which appeared to come at the close of London trading at 11:00 a.m. Eastern time. From that point, silver also traded sideways for the rest of the New York session.

The world's reserve currency had another bad day, with most of the losses coming during Far East and early London trading... and long before New York opened for business. The dollar fell about 83 basis points and is holding onto the 78 cent mark by its fingernails.

Here's the 3-year dollar chart. It's horribly oversold... and might be due for some sort of technical bounce at the moment. But, considering the current dollar dynamics, I expect any rally to be really short lived.

Like the general equity markets, the precious metals stocks didn't trade with much conviction on Friday. The high for the HUI was gold's spike high which came shortly after the London p.m. gold fix. From that high, someone was only too happy to sell it off. From that point, the HUI traded sideways until the markets closed at 4:00 p.m... but managed to close up 0.90%, making back its Thursday loss. Here's the 5-day chart for the week that was.

The CME's Comex Delivery Report showed that 37 gold and 2 silver contracts were posted for delivery on Tuesday. JPMorgan is still trading for its house [or proprietary] account. There's not a lot to see, but if you want to look anyway, the link is here.

The GLD ETF had another withdrawal yesterday. It was only 78,165 ounces... but a withdrawal nonetheless. Since the September 21st, the GLD has had one addition and five withdrawals. This is very strange considering the price action. There was no change reported in SLV.

The U.S. Mint started the month off in fine style. They reported selling 5,000 one-ounce gold eagles and 325,000 silver eagles.

There wasn't much activity reported over at the Comex-approved depositories on Thursday... the last day of September. The net change for the day was a 4,869 troy ounce addition to their inventories. It's hardly worth writing a paragraph about it.

The Commitment of Traders for silver was market neutral for the bullion banks. However, having said that, the net short position in the Commercial category is 65,413 Comex silver contracts... which translates into 327.1 million ounces. Ted Butler pointed out to me that the current sky-high net short position has remained virtually unchanged for the last three COT report.

The '4 or less' traders are short 265.3 million ounces of silver... and the '8 or less' traders are short 343.9 million ounces.

In gold, the Commercial [read bullion banks] net short position increased by another 10,432 contracts... or 1.04 million ounces. The '8 or less' bullion banks' net short position is now back over 30 million ounces at 30.3 million ounces of gold. The '4 or less' traders [led by JPMorgan] are short 18.4 million ounces... and the '8 or less' traders are short 29.7 million ounces.

The physical representation of these situations in both gold and silver can be found in Ted Butler's 'Days of Production' graph provided courtesy of Nick Laird over at sharelynx.com. There, for all to see, is the price management scheme in living, breathing colour.

¤ Critical Reads

Gunmen torch Afghan-bound NATO supply trucks

Today's first story is courtesy of reader Roy Stephens and is an article posted over at the france24.com website. The headline reads "Gunmen torch Afghan-bound NATO supply trucks". Friday's incident came a day after Pakistan blocked the convoys following the deaths of three Pakistani soldiers blamed on cross-border NATO fire. The link to the story is here.

Iceland's politicians forced to flee from angry protesters

We haven't heard much from Iceland lately... but here's a story posted about that country over at the guardian.co.uk website. The headline reads "Iceland's politicians forced to flee from angry protesters". Protesters took to the streets of Reykjavik yesterday, forcing MPs to run away from the people they represent, as renewed anger erupted about the impact of the financial crisis in Iceland. I thank Swiss reader B.G. for the story... and the link is here.

Ireland's finance minister Brian Lenihan ridiculed by Citi investors

Reader Roy Stephens has a double header on Ireland... a country that, along with Iceland and Greece, is also a smouldering ruin. Both stories are out of yesterday's edition of The Telegraph. The first is headlined "Ireland's finance minister Brian Lenihan ridiculed by Citi investors". Ireland's finance minister was publicly ridiculed on an investor call intended to calm fear over the country's economic woes. The call, with Brian Lenihan and hundreds of investors, rapidly descended into farce, forcing Citigroup, which staged the event, to pull the plug. The link to the story is here.

Britain, be warned: Ireland's budget deficit is now 32 per cent

The second story about Ireland from The Telegraph is headlined "Britain, be warned: Ireland's budget deficit is now 32 per cent". Ireland's misfortunes are a cautionary tale for Britain. Locked into the euro, Ireland's only option is to deflate its way back to competitiveness. The process is already proving almost unbearable, but it's going to get much worse before it gets better. This story is very much worth your while... and the link is here.

Weight Put on Coin's Edge

I have six precious metals-related stories today. The first one is courtesy of Florida reader Donna Badach... and it's posted over at the numismaster.com website. Though collectors still don’t know when sales will start for the 5-ounce silver bullion version of "America the Beautiful" quarters, the U.S. Mint has released photographic images of how the thin edge of the 3-inch diameter coin will look. The mint will use up 2.5 million ounces of silver on first five coins that will be produced. The headline reads "Weight Put on Coin's Edge"... and the link is here.

Have Central Banks Lost Control of the Gold Market?

In commentary posted today at goldseek.com, Julian Phillips asks, "Have Central Banks Lost Control of the Gold Market?" Of course the question presumes that central banks have been rigging the gold market for a long time... and Phillips reviews some of that history. The link to this must read commentary is here.

The Comedic Value of Naked-Short Paper Gold

Here's another piece that's posted over at goldseek.com. This story was sent to me by reader Phil Barlett... for which I thank him. Richard Daughty, or the Mogambo Guru, as he's more commonly known... is up on his soap box screaming away to all and sundry once again. Nobody's listening of course... and nobody has the heart to tell him that he's not very funny [NVF]... and I can't do it either. But I thought I'd increase the hits at his webpage just to make him think that he's really making a valuable contribution to the precious metals world. At least it will get his wife off his back for a couple of hours. So you'll just have to struggle through it and see if there are any words of wisdom [WOW] in it at all. I found at least one... but you have to look hard. The link to this really fun piece headlined "The Comedic Value of Naked-Short Paper Gold" is here.

Gold's rise to become disorderly, Davies tells King World News

The following blog was posted over at King World News yesterday... and is imbedded in this GATA release headlined "Gold's rise to become disorderly, Davies tells King World News". It's a very short piece... and it's definitely worth the read... and the link is here.

GATA clashes with Fed in federal court -- will you join the struggle

While on the subject of GATA... GATA's freedom-of-information lawsuit against the Federal Reserve in U.S. District Court for the District of Columbia, an action seeking access to the Fed's records involving gold and particularly gold swaps, is nearing a critical point.

From GATA's filings in my daily column, I hope you see how vital our lawsuit is to the establishment of free markets and fair dealing among both individuals and nations... and how much effort and expense we have put into it. The lawsuit already has extracted from the Fed that most damaging admission about its participation in gold swaps. If the lawsuit proceeds it will extract more damaging admissions.

But to continue our work, we need financial assistance from precious metals investors, mining companies, and believers in free markets.

Chris Powell outlines GATA's lawsuit against the Federal Reserve with a release headlined "GATA clashes with Fed in federal court -- will you join the struggle". There's lots of links to read in this dispatch... and, at the end, Chris graciously asks for your financial support. So do I... and the link is here.

Tocqueville fund manager John Hathaway

Lastly today is another terrific interview with Tocqueville fund manager John Hathaway. Eric King slid it into my in-box just as I was finishing with my stories for the day... and John's interview is just icing on the cake. Anything John has to say is worth your time. The interview is posted over at the King World News website... and the link is here.

Eventually it reaches a point of essential alienation, where it can no longer pretend to represent the governed. The American government is now the most powerful human organization that has ever existed. It has made a stupid habit of exercising power arbitrarily, uninhibited by moral or constitutional principle. It is not a conspiracy masterminded by some cunning genius at the center; it is a system of power which large numbers of greedy and ambitious people have learned to use. It has ceased to be a problem for Americans only; it has become a problem for a large part of the human race.- Joe Sobran

Today's 'blast from the past' is from a little-know Canadian band called 'Deliverance' that was around the music scene back in the late 1970s. This was their only hit of any consequence... and most Canadians of the proper vintage should remember it. It got a lot of air time in this country way back then, so turn up your speakers and click here.

It wasn't an overly exciting day in either gold or silver on Friday. Whatever might have happened was capped shortly after 10:00 a.m. in gold... and 11:30 a.m. in silver. Gold volume was decent... and silver volume was real chunky.

Nothing has been resolved in this huge overbought condition that exists. The bullion banks are still massively short both gold and silver... as the 'Day of Production' graph earlier in this column indicates.

Here's another graph courtesy of Nick Laird over at sharelynx.com. It shows the price, total open interest... and volume in gold on the Comex for the last four years.

The silver open interest graph is visually identical to the gold graph.

Will we continue to power upwards until the bullion banks throw in the towel... or are we going to get a JPMorgan-led a sell off? I don't know either, but I'm psychologically prepared for any eventuality.

As I mentioned in my closing paragraph yesterday, I am taking some time off. This will be my last column until either late on Sunday evening on October 10th... or early in the morning on Monday, October 11th.

Enjoy the rest of your weekend... and I'll see you right here in eight or nine days.