ed steer comments that there aren't a lot of silver longs left to be flushed out of the silver market. but i found one of the links to be of more interest. the article on gold derivatives indicates that central bank sales of gold are declining, and gold producers are de-hedging, further reducing the supply. yet the volume of gold derviatives is exploding. where is all this gold supply coming from? it isn't hard to figure out, and it isn't sustainable, either.

http://caseyresearch.com/displayDrp....

From Ed Steer:

On Friday morning in Far East trading, gold began a gentle decline that started at the beginning of trading in Hong Kong...which accelerated slightly into the London open. From there, away it (and silver) went to the upside. But about half an hour before the Comex open, both metals traded sideways until Globex trading closed at 5:15 p.m. in New York.

With options expiry and first day notice out of the way, I must admit that I'm expecting the bullion banks to back off. Not that there are a lot of contracts left to be liquidated by the longs anyway. There are (as Ted Butler says) only a finite number of longs that can be liquidated. The rest just aren't going to budge, and the bullion banks know that. It appears that we've had a full clean-out to the downside in both gold and silver. It's not possible to know how successful 'da boyz' were, because all of the pertinent data won't be out until the COT next Friday.

Changes in open interest in both gold and silver for Thursday are as follows. Gold open interest fell 7,095 contracts and silver open interest dropped 492 contracts.

In the Commitment of Traders report issued yesterday for positions held at the end of trading on Tuesday, May 27th...virtually none of this past week's hammering of the gold and silver price shows up in this report. As I've mentioned in the past, the cartel can manage this report to a certain extent by holding back information that should normally be included. This past week was a case in point, as it doesn't appear that any data from Tuesday is in this report. As I've said before, we will have to wait until next Friday's COT before we have any indication.

As far as concentration goes...the '8 or less' traders in gold currently hold 81.6% of the entire short position on the Comex. In silver it's 78.2%. Both numbers are up slightly from last week. In terms of ounces of gold, the '8 or less' bullion banks are short a whopping 24.5 million ounces...and the '4 or less' are short 20.1 million ounces. These are all-time record numbers. But without a doubt, all of these numbers will be down significantly now that the blood bath is over. Al Korelin of the Korelin Economics Report interviewed me about the goings-on in the gold and silver markets last week...and if you'd like to listen to it, the link is here.


Without question, I think the most important story out of Wall Street yesterday was this Bloomberg piece about Wall Street firms receiving permanent access to money from the Federal Reserve. Just last week, Wall Street and the banking system were saying that 'everything was fine.' Obviously everything isn't fine. The most disturbing part of this article is a comment that Vice Chairman Donald Kohn made when he said, in response to an audience question, that the Fed's shortage of Treasury securities for them to lend out is "not one of the things I'm worried about." If he's not worried about that...then what is he worried about? I think we already know...the collapse of the entire economic, financial and monetary system. The story is linked here.

You may remember that the Bank for International Settlements (BIS) released their semi-annual derivatives report last week...for the period ending December 31, 2007. GATA consultant, Reg Howe, wades into this fray with his most excellent commentary...which in turn is accompanied by some equally excellent graphs. The report is entitled "Gold Derivatives: Moving Up Again" and is linked here.