As I mentioned in 'The Wrap' in Friday's column, the gold price had a nice rally in early morning trading in the Far East, until precisely 10:00 a.m. Hong Kong time, before a thoughtful not-for-profit seller showed up. That was the high of the day...and after that, the gold price spent the rest of the Friday trading session within ten bucks of $1,620 spot. An attempt at a rally that began the moment that London closed at precisely 11:00 a.m. Eastern time, wasn't allowed to go anywhere. Gold closed in New York at $1,624.80 spot...up $8.90 on the day. Net volume, which has been on the decline every day this week, was only 146,000 contracts.

It should come as no surprise that silver's high of the day was also at 10:00 a.m. Hong Kong time. The silver price then spent the rest of Friday trading in a one dollar trading range between $31 and $30 spot...closing at the bottom of the range at $29.97 spot...down 70 cents on the day, giving back everything it gained on Thursday. Net volume in silver was in the 38,000 contract range.

Here's the 5-day U.S. dollar chart for entertainment purposes only. As you can see, the currency spent the first half of the week digging itself a 140+ basis point hole...and the latter half of the week filling it up again. What a wonderful reserve currency!

For the second day in a row, the gold stocks followed the gold price around like a shadow...and despite the fact that the general equity markets finished in the toilet, the HUI hung on for a gain of 0.43% on the day.

And, for the second week in a row, the 5-day HUI chart is missing Monday's data...but the trend looks pretty clear, as I believe that an important bottom has been put in.

Six of the seven stocks in Nick Laird's Silver Sentiment Index finished in the red on Friday, so it's no surprise that the index finished down 2.54% on the day.

(Click on image to enlarge)

The CE Daily Delivery Report for the second delivery day in the October delivery month was busy as well. There were 2,602 gold and 4 silver contracts posted for delivery on Tuesday. The lion's share of the deliveries in gold [2,529 contracts] were from JPMorgan's house [insider trading] account. The big receiver/stopper was JPMorgan in its client account...1,824 contracts...and Merrill was very distant second with 526 contracts to be received on Tuesday. The action is worth a quick look...and the link is here.

There were no reported changes in GLD...but over at SLV, an authorized participant withdrew 1,654,936 troy ounces.

There was another big sales report from the U.S. Mint to cap off the month. They reported selling another 4,500 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 460,000 silver eagles. Baring any further update on Monday, total sales for September are as follows: 91,000 ounces of gold eagles...13,000 one-ounce 24K gold buffaloes...and a whopping 4,460,500 silver eagles, which is the second largest sales month for silver eagles in all of 2011...to date.

Year-to-date, the U.S. Mint has used 843,500 ounces of gold in their gold eagle program...132,500 ounces of gold in their 24K gold buffalo program...and an eye-opening 33,411,500 silver eagles.

Before we put September mint sales in the history books, reader Ron Copley from Carmel, Indiana has provided September sales for other U.S. Mint products that are made of silver. Here's his e-mail to me last night.

Ed, here is the September summary for the 5-ounce America the Beautiful bullion coin program, as well as the figures for the Proof and Uncirculated silver Eagles. Lower silver prices have hurt direct sales from the Mint to collectors since the Mint's pricing is not updated in real time to reflect the lower prevailing silver price, and therefore their pricing is [at] quite a premium to the silver content. ATB 5-ounce coin sales were suspended on the Mint's website earlier this week so they can be re-priced. The root cause of the problem is the Mint's restrictive pricing model which requires them to post updates for certain products in the Federal Register before they can be offered online. It sure would be nice if Congress would permit them to price their products in real time, based on a premium to the spot price, like most bullion dealers.

For the month of September, the mint used 75,830 ounces of silver in the ATB program...and the 'proof' and 'uncirculated' one-ounce silver coin sales in September were 25,770 and 194,000 respectively. Year-to-date these three silver bullion coins have consumed 2,908,436 troy ounces of silver...so you can add that consumption to silver eagle sales.

The Comex-approved depositories did not receive any silver on Thursday...but shipped 482,339 troy ounces out the door. The link to that action is here.

Well, the Commitment of Traders Report lived up to its advanced billing...especially in silver. In silver, the bullion banks decreased their net short position by an incredible 16,446 contracts...which is 82.2 million ounces. I've never seen a 1-week change this large in silver, ever! The net short position in the Commercial category declined to 121.3 million ounces. It's been many years since the Commercial net short position has been this low.

The '4 or less' bullion banks are now short 159.7 million ounces...and the '5 through 8' Commercial traders are short 42.9 million ounces. So these eight traders combined are short 202.6 million ounces of silver, which is 167% of the entire Commercial net short position. If these eight Commercial traders disappeared, the remaining Commercial traders [Ted Butler's raptors...all 34 of them] are massively long the silver market, just like everyone else.

In gold, the Commercial net short position declined by 30,945 contracts...or 3.1 million ounces...and is now down to 16.7 million ounces. Like silver, it's been many years since the Commercial net short position in gold has been this low.

The '4 or less' Commercial traders are short 15.3 million ounces...and the '5 through 8' Commercial traders are short 4.1 million ounces. These eight Commercial traders [almost all of them bullion banks] are short 19.4 million ounces of gold, which represents 116% of the Commercial net short position.

Just like in silver, if these eight traders vanished, the remaining 41 traders in the Commercial category are net long the gold market.

What's even more incredible is the fact that since the Tuesday cut-off, there has been a further 20,000 contract decline in gold open interest, just on Wednesday and Thursday alone...plus further declines in silver open interest as well. I'm only guessing here, but I'd say that the true COT numbers are actually much better than yesterday's report indicate.

But, as Ted Butler has been hammering away to me on the phone all this week, the fact is that the real reason the price declined was because of paper trading on the Comex...and it had nothing whatsoever to do with real-world supply and demand fundamentals. Eight [and probably much fewer] traders in gold and silver control the price of both these metals...and that's flat-out illegal. They hold a short-side corner on these two markets. The tail is wagging the dog, as there is no true price-discovery mechanism allowed to operate in these markets. Can you imagine how fast the CME and CFTC would react if eight or fewer traders had a long-side corner on any commodity??? Ask the Hunt brothers and you'll find out...and they didn't even get close to the position sizes that JPMorgan et al, hold. Then there's the Sumitomo copper case...but I don't have time to get into that here.

I haven't posted Nick Laird's Days of World Production to Cover Short Positions graph in quite some time, so here it is now. Please note the red bars in particular. These are the '4 or less' traders in every commodity that's traded on the Comex futures market. Note how the biggest ones are in the precious metals...silver and gold in particular. It would take 82 days of total world silver production for the '4 or less' Commercial shorts to cover their short positions. In gold it's 67 days. All this data was extracted from yesterday's Commitment of Traders Report...and then converted into days of world production for each commodity.

(Click on image to enlarge)

My bullion dealer had a couple of surprises this past week. The first thing was that 100-ounce silver bar delivery times went from one month to two months. I would suspect the rest of his product line in silver will have increased delivery times in pretty short order as well. The second big surprise was that one-ounce gold bars are no longer available...and none of his suppliers are even taking orders at the moment. That has never happened before in the history of his company.

Here's a freshly-updated graph that Nick Laird sent me yesterday. The Office of the Comptroller of the Currency issued their June derivatives report for all U.S. banks this past week. Here are the OTC derivatives in precious metals for the largest fifty U.S. banks...and only three of them hold precious metals derivatives. You can see why JPMorgan and HSBC USA have been at the top of my hit list for years.

(Click on image to enlarge)

Since it's Saturday, I get the chance to empty out my in-box. Fortunately, I don't have that many stories to post, so reading or listening to what I do have shouldn't be too arduous.

¤ Critical Reads

This economic collapse is a 'crisis of bigness'

Leopold Kohr warned 50 years ago that the gigantist global system would grow until it imploded. We should have listened.

Living through a collapse is a curious experience. Perhaps the most curious part is that nobody wants to admit it's a collapse. The results of half a century of debt-fuelled "growth" are becoming impossible to convincingly deny, but even as economies and certainties crumble, our appointed leaders bravely hold the line. No one wants to be the first to say the dam is cracked beyond repair.

To listen to a political leader at this moment in history is like sitting through a sermon by a priest who has lost his faith but is desperately trying not to admit it, even to himself. Watch Nick Clegg, David Cameron or Ed Miliband mouthing tough-guy platitudes to the party faithful. Listen to Angela Merkel, Nicolas Sarkozy or George Papandreou pretending that all will be well in the eurozone. Study the expressions on the faces of Barack Obama or Bernanke talking about "growth" as if it were a heathen god to be appeased by tipping another cauldron's worth of fictional money into the mouth of a volcano.

In times like these, people look elsewhere for answers. A time of crisis is also a time of opening-up, when thinking that was consigned to the fringes moves to centre stage.

This piece was posted in The Guardian last Sunday...and was sent to me by reader "Richard T". It will take you less than five minutes to run through it...and it's certainly worth the read. The link is here.

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GM Is Watching You…

I have never liked GM’s OnStar system – in part because I don’t like the idea of my car that I paid for having someone else’s “black box” recording (and transmitting) data about how I drive, where I drive and even when I drive. I also don’t like that GM force-feeds OnStar to every buyer of every GM car – whether the buyer wants it or not.

I believe that GM’s long-term goal is to see to it that not only every GM vehicle is equipped with a “black box” (technically, an Event Data Recorder, or EDR) but that all vehicles are so equipped – and every single driver in the United States – possibly the world – monitored whenever he or she is operating a motor vehicle.

It is entirely within the realm of technical possibility that they’ll even know exactly what you’ve been talking about while in your car, too – because OnStar is very much like a Telescreen from Orwell’s 1984. If you have an OnStar-equipped car, you have GM’s microphones in your car. And GM can turn them on anytime it likes – and record anything you say.

No, I am not exaggerating.

This amazing must read story was posted over at lewrockwell.com on Wednesday...and I thank reader Jacque Theberge for sharing it with us. The link is here.

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'We didn't mean to track you' says Facebook as social network giant admits to 'bugs' in new privacy row

Facebook has admitted that it has been watching the web pages its members visit – even when they have logged out.

In its latest privacy blunder, the social networking site was forced to confirm that it has been constantly tracking its 750 million users, even when they are using other sites.

The social networking giant says the huge privacy breach was simply a mistake - that software automatically downloaded to users' computers when they logged in to Facebook 'inadvertently' sent information to the company, whether or not they were logged in at the time.

This story was posted over at The Daily Mail on Wednesday...and I thank reader Scott Pluschau for sending it my way. The link is here.

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From the man who discovered Stuxnet, dire warnings one year later

Stuxnet, the cyber-weapon that attacked and damaged an Iranian nuclear facility, has opened a Pandora's box of cyber-war, says the man who uncovered it.

Stuxnet may have set back Iran's nuclear ambitions by years. But it also could prove a Pyrrhic victory for its still-unknown creator – a sophisticated cyber-weapons nation state that Langner argues could be the US or Israel. Like the Hiroshima bomb, Stuxnet demonstrated for the first time a dangerous capability – in this case to hackers, cybercrime gangs, and new cyber-weapons states, he says in an interview.

With Stuxnet as a "blueprint" downloadable from the Internet, he says, "any dumb hacker" can now figure out how to build and sell cyber-weapons to any hacktivist or terrorist who wants "to put the lights out" in a US city or "release a toxic gas cloud."

This story was posted in The Christian Science Monitor on September 22nd...and I thank Washington state reader S.A. for sending it along. This is another must read...and it's not overly long, but very fascinating...and the link is here.

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NEIN, NEIN, NEIN, and the death of EU Fiscal Union

Judging by the commentary, there has been a colossal misunderstanding around the world of what has just has happened in Germany. The significance of Thursday’s vote by the Bundestag to make the EU’s €440bn rescue fund (EFSF) more flexible is not that the outcome was a "Yes".

This assent was a foregone conclusion, given the backing of the opposition Social Democrats and Greens. In any case, the vote merely ratifies the EU deal reached more than two months ago – itself too little, too late, rendered largely worthless by very fast-moving events.

The significance is entirely the opposite. The furious debate over the erosion of German fiscal sovereignty and democracy – as well as the escalating costs of the EU rescue machinery – has made it absolutely clear that the Bundestag will not prop up the ruins of monetary union for much longer.

Horst Seehofer, the leader of Bavaria’s Social Christians, said his party would go "this far, and no further".

This is Ambrose Evans-Pritchard up on his high horse once again. It's a story posted in yesterday's edition of The Telegraph...and is Roy Stephens only offering of the day. The link is here.

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Gold's plunge was 'engineered' by central banks, Gerald Celente tells GoldSeek Radio

Market analyst Gerald Celente today tells GoldSeek Radio's Chris Waltzek that the recent plunge in gold was "engineered" by central banks to scare people out of investing in precious metals.

That's only partly true of course, but he's got the 'engineered' part exactly right. The interview runs just under 17 minutes...and is posted over at the goldseek.com/radio website...and the link is here.

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Gold Price Slump Stokes Jewelry, Investment Demand in India

A slump in gold prices from a record will fuel demand for the precious metal before a festival season in India, the world’s largest consumer, according to the nation’s biggest jewelry retailer.

“Everyone is a buyer now, and the investment demand is huge,” Prithviraj Kothari, president of the Bombay Bullion Association said in an interview. “Before the fall in prices, the showrooms were empty, and now there are queues for purchasing gold coins and bars.”

A better-than-expected monsoon may push up rural incomes and boost India’s gold imports by more than 4 percent to 1,000 metric tons this year, Kothari said on Sept. 20.

This short Bloomberg story was filed from Mumbai on Tuesday...and I thank reader Julius Adams for sharing it with us. The link is here.

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Gold is STILL a buy

Gold has dropped in price to around $1,600 per ounce and suddenly some say that gold is no longer a commodity that investors should embrace. I say ridiculous.

In times of panic, investors sell everything, even assets that have medium to long-term growth opportunities. The recent selling of gold was related to panic from hedge funds needing to raise money for redemptions as well as a tightening of margin requirements. This was not selling pressure based on any fundamental change in conditions or outlook.

Like every other main-stream commentator, this gentleman doesn't understand what really caused the sell-off, but everything else he has to say is spot on...and I urge you to take the time to run through it.

This short item was posted over at the marketwatch.com website yesterday...and I thank Florida reader Donna Badach for bringing it to my attention. The link is here.

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The Anglo-American Precious Metals Derivatives Duopoly: Quarterly OCC Report

You may recall the graph posted above about the concentrated derivatives positions in precious metals held by JPMorgan and HSBC USA. Here's a story about this very thing.

This story gets a little thick at times...but it's not the parts that you won't understand that will bother you...as the bits you do grasp are scary enough. Very early in GATA's existence, it was discovered [as Chris Powell so admirably put it] that we were up against all the power and all the money in the world...and this is it.

This short piece, posted over at Jesse's Café Américain, is well worth your time...and the two charts from the latest OCC quarterly report on the derivatives exposure of US Banks and Trusts, deserve a closer look...and you just have to click on them to bring them up to full screen size.

I thank reader U.D. for sharing this story with us...and the link is here.

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Is Gold Mining Returning to the Yukon?

Here's a short, but very interesting piece that was included in yesterday's edition of Casey's Daily Dispatch. It was written by our resident geologist Louis James, the editor of Casey's International Speculator. The link is here.

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Interview with John Hathaway

A couple of days ago I posted a King World News blog that featured John Hathaway. Well, Eric sent me the full audio interview in the wee hours of this morning. I haven't had time to listen to it, but I'd guess that it's a must listen...and the link is here.

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Don't worry, gold's correction is 'about over' Lassonde tells King World News

Mining entrepreneur Pierre Lassonde told King World News last night that gold's correction is "about over," that "people don't have to worry for one second," and that gold is going to $10,500, if not necessarily by next Thursday.

I thank Chris Powell for wordsmithing the above introduction...and the link to this KWN audio interview is here.

View full GSD edition

(Click on image to enlarge)

The desperation of the global monetary powers that be are reaching such heights that they are willing to perform any fiscal or monetary form of atrocity to (they hope) hold things together. Meanwhile, on the paper investment markets, the participants are literally at their wits end. And whenever that happens, their "faith" in the "system" is all they have left to sustain them, so they retreat to the US Dollar and US government debt paper. After all, if THAT folds up, so will the system. - Bill Buckler, Gold This Week, 01 October 2011

Today's 'blast from the past' was released in the late fall of 1966...and I remember that part of my life very well, as I was just fresh out of high school...and this song brings back lots of memories. The link is here.

For the second day running there were no preliminary open interest numbers posted at the CME's website, so there's no way to get a general feel for what may have happened yesterday...and it will be interesting to see if they are posted at any time during the weekend.

The final numbers for Thursday's trading day were posted very early in the afternoon Eastern time yesterday, which is very late...and a break from the normal posting pattern that the CME has. I wonder if it's permanent.

Anyway, the final open interest numbers for gold on Thursday showed another big decline...and as I mentioned further up in this column when discussing yesterday's COT report, gold o.i. has dropped another 20,000+ contracts since the Tuesday cut-off, not including what may have happened on Friday. The price action on Wednesday and Thursday doesn't support this big of an o.i. decline, so I'm inclined to think that this data was deliberately withheld so that the true bullish situation in the COT will not show up until next Friday's report. Ted Butler doesn't read it quite the same way as I do, so we'll have to wait and see how this all pans out next Friday.

Of course the data is wildly bullish in both metals already...so it's just a matter of waiting around for the inevitable rally to begin in both gold and silver...with the $64,000 question being, who will be the short seller of last resort taking the other side of the trade. Both Ted and I would like to believe [maybe naïvely] that JPMorgan et al won't be on the short side this time, as they just expended all this energy covering as many shorts as they could.

One thing I should point out is the fact that despite these huge declines in open interest in both metals that were reported in yesterday's COT report, only some of the decline was the 'big 8' covering short positions. Most of the improvement came from the smaller Commercial traders [Ted Butler's raptors] going long. This has the mechanical effect of decreasing open interest...but they will be selling for a profit as prices rise...and then the opposite will occur as they sell their longs... as open interest will then increase for the same mechanical reason.

The reason I mention this is that, as the next rally gets underway, it will be hard to tell on a daily basis whether the daily open interest increases are from fresh shorts being placed by the bullion banks, or whether it's the raptors selling longs and taking profits...or a combination of that.

That's the main reason why I stopped reporting the o.i. numbers, because it's impossible to tell until Friday's COT report is published for the week that was...and the daily numbers can be terribly misleading at times...unless we're in a major rally, or major decline like we just had. Then it's pretty easy to tell what's happening day to day.

The U.S. equity markets had a terrible time of it yesterday...and one has to wonder what trading action will be like world-wide when Far East trading begins on Sunday night here in North America. I suppose it's possible that if we get a bloodbath in the equity markets next week...that would allow 'da boyz' the opportunity to shake the gold and silver trees one more time. But, as Ted Butler said, we're long past the blood-out-of-a-stone point now. We're also past the fat and the muscle tissue...and cutting into the bone.

That fact certainly hasn't deterred the buyers of physical metal, as they are still buying silver and gold hand over fist...and rightly so, as JPMorgan et al have put it on sale at 25% off from last week...and 40% from its May high. I hope you're getting your share.

I'm still of the opinion that the only way out of this financial and monetary mess that we're in, is a re-pricing of the world's gold reserves to shore up the balance sheets of the central banks. And with the bullion banks now sitting at their lowest net short positions in years, the time would seem to be right to make the sort of move...if that plan is in the cards.

There's not much else to report. I'm not going to post any charts, as they haven't changed much since the last time I stuck them in this column at this point in time.

But, like the physical bullion buyers, the precious metal shares are now on sale as well. So there's still time to either re-adjust your portfolio...or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well. And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

Enjoy what's left of your weekend...and then wait patiently to see what Sunday night brings.