ed steer mentions that the us mint only produced 50,000 silver eagles, when they are capable of minting 400,000. the trouble is that they don't have the blank planchets. the mint had to transfer planchets that were intended for the more expensive proof eagles just to produce a few more bullion eagles. that supply can't last for long either.

Now that it appears that the worst is behind us, I have to ask the question..."What's next?" As the longs come back into this market on the Comex...like they were on Friday...who is going short against them? The '2 or 3' US bullion banks just spent the last two months covering as many shorts in gold and silver as possible...and going long. Are they going to put their collective heads back in the lion’s mouth once again?

The current low prices of bullion have driven bullion investors into a buying frenzy world-wide. The bullion banks are being bled white, and they can't keep this up forever...or even for very long. Then there's the little matter of the miners staying in business...as it simply isn't viable for a lot of them at these prices. Personally, I'm expecting a huge rally at any time. If/when it comes...and as we watch it unfold...ask yourself this question: who is picking up the short side of the trade as the price powers higher? If the '2 or 3' U.S. bullion banks don't show up on the short side of gold and silver this time, we'll be at some huge prices in a flash.

The Commitment of Traders yesterday showed an improvement in the bullion banks silver short position. They closed out 2,001 short positions and reduced their longs by 656 contracts, for a net weekly 'gain' of 1,345 contracts. The tech funds in the Non-Commercial category sold 1,470 longs and went short 789 contracts, for a net 'loss' of 2,259 contracts. In gold, the bullion banks only covered 490 short contracts, but laid on a whopping 13,557 new longs...for a net 'improvement' of 14,047 contracts. That's quite a bit, and since the Tuesday cut-off, it has probably improved a bunch as well. On the other side of the gold equation, the tech funds in the Non-Commercial category pitched 5,305 longs and went short 5,231 contracts for a 'loss' of 10,536. The small traders went short the difference...about 3,500 contracts net.

The bullion banks are having a much easier time getting out of their gold shorts than they are their shorts in silver. The COT report from yesterday is linked here. Tech funds...what are they? Here's an explanation that Ted Butler gave me today. I hope this helps explain things..."Tech funds are a subset of the whole hedge fund set. They are futures-only traders (also called CTA's -- commodity trading advisors registered with the CFTC). They buy and sell as technical signals are given based upon violations of the moving averages. Most of their trading is on organized futures exchanges, but they do trade foreign currencies on the InterBank market...probably on the ICE (Intercontinental Exchange in Atlanta) as well. They are the food supply for the Commercials (bullion banks - Ed) on the Comex - the T-Rexes (8 or less traders) and the raptors (everybody else in the Commercial category)."

Yesterday, for the umpteenth day in a row, the gold premiums in India were sky-high...far above legal import. They're flying this stuff in by Boeing 747 now. Friday's price rise brought the fence-sitters out in force. My bullion dealer here in Edmonton had his biggest silver day ever...a lot of it was 1,000 ounce good delivery bars...and outsold gold by a ratio of 1,300 to 1. Ted Butler advised me that only 50,000 American silver eagles were minted this past week...and they're capable of stamping out about 400,000/week. The authorized dealers were shocked at how few were released.

We certainly know that it wasn't demand that fell off. The silver ETF was unchanged again on Friday! Astounding! Silver was down more than $2 on the week at one point...and the SLV never moved! It will now need an infusion of physical silver based on yesterday's volume and price action. This dichotomy cannot last. Something has just got to give here.

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