Tuesday, September 13, 2011

Definitely Meanies around

The CME Final for Monday indicates that on volume of 242,528 lots, a low 9.24% or 20,000 lots above estimate, open interest slipped 1,087 lots, 3.38 tonnes or 0.21%, to 517,071 lots. Gold of course spent the whole day going down, showing a substantial 2.15% loss at the stock market close. The only explanation that fits is that much of the downward pressure was short selling in a market in which buyers were inhibited.

Indian ex-duty premiums: AM $1.05, PM $2.05, with world gold at $1,824.20 and $1,811.65. Too thin, and adequate, for legal imports. The rupee was exceptionally volatile, initially firming to a 0.3% gain and then plunging to close at a 0.8% loss, at $1= R47.59 (R46.20). International gold arbitrage must have been seriously impeded. The stock market lost 0.21%.

As noted last night, local Vietnam gold today stood at a premium of $35.95 to world gold of $1,831.25 (Monday 31.42/$1,849.20).

Shanghai, returning after a long weekend, saw gold close at a premium of $8.20 to world gold of $1,824.20 on volume equivalent to a moderate 8,336 lots (Friday $8.24/$1,875). Parts of China were still closed. The Yuan was brought down to a 6.67% post $US "depegging" appreciation (6.86%).

On day session volume equivalent to12, 425 NY lots, TOCOM saw open interest rise 2.047 tonnes (658 NY) and the public add 3.17 tonnes (8.8%) to their net long, mainly by increasing their long. The active contract closed down 58 yen but world gold gained $3.50 during the session to go out $13.20 above the NY 4PM level.

The ECB weekly statement of condition indicated that "gold and gold receivables" rose E1Mm (958 ozs) because of a purchase by a subordinate CB (last week no change).

Today gold rose quite steadily to peak up $25.60 in the Dec contract around 0-25AM NY time. Downward pressure then culminated in a vicious selling raid starting around 3-50AM NY which slashed $30 off gold in 15 minutes, causing Dec gold to register a down $18.50 low around 4-05AM at $1794.80. This was not sustained, however, and gold actually registered a secondary peak (so far) just after the NY floor open. Estimated volume at 11AM was a moderate 137,548 lots, of which more than half was done before the floor open.

The OI behavior and the repeated occurrence of these violent down spikes clearly indicate there are malign forces about in gold. That element which is commercially motivated would do well reconsider the wisdom of their stance when the inevitable decline in volatility in Eastern currencies enables the traditional physical markets to have their full say.