European Central Banks Sell No Gold...Again!

After Monday's action, I wouldn't read a thing into what happened on Tuesday. Gold rose about six bucks in Far East trading going into the London open... and then quietly gave most of it back by 9:00 a.m. in early Comex trading in New York... which turned out to be the low of the day. From there, gold gained about five bucks going into the close of electronic trading in New York.

Silver followed the same general flight path... gained 20 cents in the Far East... lost 30 cents from the London open until 9:00 a.m. in New York... and gained a dime into the N.Y. close.

Volume was very light in both metals yesterday. The usual New York gold commentator had the following... "Estimated volume was only 49,512 lots. Quite remarkably, if the volume estimates have any credibility... 51% traded before 9 a.m... with less than 4,000 lots trading in the last half hour."

Open interest changes after Monday's slaughter in gold and silver were about what Ted and I were expecting. Gold o.i. fell 8,204 contracts to 377,758...on really decent volume of 102,816 contracts. And in silver, o.i. dropped a bunch, down 4,718 contracts to 104,411...on really big volume of 53,127 contracts. There's still a possibility that we could see more declines in open interest when Tuesday's report becomes available later this morning... as on big price moves like this, there are always timing issues when it comes to reporting. I'll let you tomorrow.

Yesterday's Comex Delivery Report showed that 124 gold contracts were delivered. There was no reported activity in silver...and there was no change in either GLD or SLV yesterday, either. The U.S. Mint drew a blank... pardon the pun... and there was no silver reported shipped in or out of the Comex-approved warehouses.

The usual N.Y. gold commentator had a few points of interest... "The Bombay Bullion Association reported that Indian gold imports in July were 7.8 tonnes, compared to 24 tonnes last July... Local Vietnam gold stood at a $13.75 premium to world gold of $941 early on Wednesday morning." [Smuggling will certainly pick up if this sort of premium persists for any length of time. - Ed] "TOCOM [Tokyo Commodity Exchange] intensified its bottom fishing. Open interest rose by 1.35 tonnes... and the public added a considerable 5.44 tonnes to their long positions... up 15.4%."

"The European Central Bank's weekly statement of condition, published today, showed no fall in 'gold and gold receivables'. Last week the fall was 0.14 tonnes. The ECB group is giving a good imitation of having withdrawn from the market. Of course a sale by the ECB remains possible. On the basis of past behavior, that would be separately announced some time before appearing in this report."

"Open interest has now lost 5.2% since it peaked recently on August 7th. The reaction following the early June peak saw open interest slip 8.6% from June 4th to July 9th. The contraction seems to be proceeding more rapidly this time."

There were no gold or silver stories of note yesterday, either.

However, I have three other stories today. The first is a Bloomberg item sent along by Craig McCarty. "Argentina, the biggest beef-consuming nation, may resort to imports for the first time in two years as a drought kills cattle and export controls prompt ranchers to quit the business." The situation there sounds just about as desperate as the current hog situation that exists in the United States. The story bears the headline "Argentina May Import Beef First Time as Herds Die"... and the link is here.

In another Bloomberg story filed early Wednesday morning from Singapore, is this headline..."Pimco Says dollar to Weaken as Reserve Status Erodes"... "While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative," wrote Curtis A. Mewbourne, a Pimco portfolio manager. Once again I thank Craig McCarty for this story... and the link is here.

And lastly, I have another story on hyperinflation. Yesterday it was Weimar Germany...today it's from Zimbabwe. It's not so much on the hyperinflation itself...but on how a nation survives with no currency to call its own... after their central bank governor, Gideon Gono, destroyed it with the printing press. The story, posted at comcast.net, is headlined "The 'Zimdollar': Dead, but still used for bus fare". I thank reader Charles Dubelier for sending it to me, and the link is here.

It is historically true that no order of society ever perishes save by its own hand. - John Maynard Keynes

Yesterday was a just about a big zero as far as the precious metals markets went. It appeared that after Monday's hard day of pounding down gold and silver prices, the N.Y. bullion banks took yesterday off. But it seems that something is afoot in late Wednesday afternoon trading in Hong Kong... and it started in earnest shortly after the Sydney close at 1:00 a.m. New York time this morning. Gold has already touched it's Tuesday low price...and silver has actually gone below its low... and it appears that this trend is continuing [and accelerating] into the London trading day as write this. The U.S. dollar is down 33 basis points... so it's not a move based on currency... as is often the reason given. Today's precious metals trading in New York could get ugly.

See you tomorrow.