ted butler comments on the drop in open interest:

The big drop in gold open interest that happened on Monday, is still the talk of the town. As I said in this column yesterday, silver analyst Ted Butler would have something to say about it...and here's what it was..."The latest strange occurrence was the sharp drop in gold open interest on Monday, when over 80,000 contracts suddenly disappeared. Making the historic drop even more notable was that most of the decline was centered on the more deferred months with very little trading volume reported to support the liquidation. In fact, over the past week, while silver spreads changed in price dramatically, gold spreads didn't budge at all."

"I've read the early commentary and inquired of those in the know for an explanation for the sudden liquidation of these gold spreads and I would like to offer my own. As I wrote recently, I had written privately to some high officials at the CFTC back in early November, warning them of the inordinate amount of spread positions in Comex silver and gold futures. I warned them that in a silver shortage, the large number of spreads could come to cause severe financial pressure on the clearinghouse system should we move into a pronounced backwardation in silver. [That backwardation has not actually occurred yet, but the dramatic silver spread move over the past week gives a strong suggestion that it might.]"

"I also wrote to these CFTC officials [strictly on a good citizen basis] that while backwardation was less likely in gold, given the improbability of a physical gold shortage, the large amount of gold spreads open on the Comex had to be largely uneconomic in nature and that the CFTC should jawbone the traders holding these uneconomic spreads to close them out. I can't say that the CFTC took my advice and asked those spread traders to liquidate, but then again I can't say that the CFTC didn't take my advice, either. What I can say for certain is that the question of whether these gold spreads were uneconomic in nature appears to have been settled. For such large quantities of spreads to be suddenly closed out with virtually no impact on gold spread pricing [unlike in silver] would indicate they were uneconomic and phony to begin with. As a reminder, I have long contended that the presence of phony spreads in large quantities has the effect of severely understating the true concentration on the part of the manipulators."

http://www.caseyresearch.com/gsd/edition/silver-investment-next-decade-eric-sprott