Germany's Bundesbank Advises No Gold Sales From Them In Year One

Gold didn't do a heck of a lot on Friday. It's high of the day in London was shortly after 11:00 a.m. From that high, gold drifted lower until the Comex open in New York. Gold immediately spiked up about $6 before the rug got pulled out from under it. From it's spike high to its spike low was around $14. The gold price recovered somewhat from there, but that was basically it for the day. Silver had a similar day.

Now for gold's open interest changes for Thursday... the day of the big smack-down. I was expecting o.i. to fall quite a bit...but according to the data provided by Bill Murphy over at lemetropolecafe.comyesterday... gold o.i. rose 612 contracts to 467,285. Silver o.i. went up 187 contract to 128,193 in total. If that's true, then there was massive shorting involved on Thursday, or these o.i. numbers aren't worth the paper their printed on.

The Commitment of Traders report for positions held at the end of trading on Tuesday, September 22, showed more short-side deterioration in both gold and silver. In the week that was, the bullion banks added another 2,429 contracts to their net short position in silver. The bullion banks are now net short 64,355 Comex contracts, which is a whopping 321.8 million ounces. The full colour COT graph for silver is linked here.

In gold, the bullion banks increased their net short position by a smallish 2,949 contracts to 287,610 contracts, bringing their current net short position to 28.8 million ounces of gold. This is another new all-time high short position. The full colour COT graph for gold is linked here.

Silver market analyst Ted Butler was interviewed for about 10 minutes Friday by Eric King of King World News. They talked about the continuing record short position of the commercial traders in gold and silver, which Butler is inclined to think will force a breakdown in prices, and about the origin and prospects for the silver market investigation being conducted by the U.S. Commodity Futures Trading Commission, about which Butler is optimistic. Ted's commentary is a must listen, so I urge you to stop reading here and listen to what he has to say. The link is here.

The second quarter derivatives report [for positions held at June 30/09] was just published by the Office of the Comptroller of the Currency the other day. JPMorgan and HSBC USA are still holding the vast majority of all precious metals derivatives by all U.S. banks. Between the two of them, they hold 95.7%. However, between the 1st and 2nd quarter reports, JPM has reduced it's gold derivatives by 12.5% and it's silver derivatives position by 7%. HSBC is also heading for the exits... with their gold derivatives position down a large 28.7% and their silver derivatives position virtually unchanged from the first quarter. The relevant info is located in Table 9 on page 30... and the link is here.

One last thing about this report. Ted Butler [who sent it to me] said that JPMorgan's silver derivatives position is "at very low historical levels."

The Comex Delivery Report showed that 53 gold and 24 silver contracts were delivered yesterday. There were no changes reported over at the GLD ETF... but the SLV had a whopping 4.13 million ounces withdrawn. That's a lot... and it's my guess that it had nothing to do with the current price action, but that a unit holder needed real physical silver for something. The U.S. Mint had an update yesterday. They minted another 7,000 gold and 200,000 silver eagles... bringing the monthly totals of both up to 99,500 for gold eagles and 1.3 million for silver eagles. Over at the Comex-approved depositories, 243,703 ounces of silver were taken into inventory.

The usual New York gold commentator had a lot to say yesterday... "Indian ex-duty premiums: AM $1.95, PM $3.09, with world gold at $996.83 and $996.71. Adequate for legal imports, and a reasonable response to gold’s sudden slump."

"Unfortunately for the nerves of gold’s friends, India has a number of public holidays next week, some of which are taken seriously. Monday is one. So India’s support to world gold during this raid may not be visible, and on some days may actually be impeded. Nevertheless, it is clearly going to be there."

"Vietnam local gold stood at a $7.31 premium to world gold of $996.77 in the Vietnamese afternoon (Thursday $1.87/$1,010)."

"By contrast, the active contract on the Shanghai Gold Exchange closed at a 75c discount to world gold of $995.82. Today the Exchange reported its warehouse stocks: 216 Kgs of gold – unchanged. China’s role in the world gold market is largely mythical."

"TOCOM traded the equivalent of 14,191 Comex lots in its day session: quite heavy. Open interest fell 1.85 tonnes (595 Comex) but the public added 2.41 tonnes to its long. The active contract lost 49 yen but world gold went out 50c above the NY floor close."

"The Bundesbank has announced it will sell no gold in the first year of WAG3, other than 6.5 tonnes to the Federal Government, presumably for coins."

"Participants in world gold wisely stayed on the bottom of their trenches today, waiting to see what the Bears on the Comex would do. Predictably, gold was hit hard on the floor open, seeing a December gold low of down $13.40. Volume at 9AM was estimated at a heavy 62,814 lots."

"Following the congenial new policy, yesterday’s open interest has been published: down 2,377 lots (7.13 tonnes or 0.51% - Dec gold was down 1.5%). This small decline proves that yesterday was not primarily long liquidation, but a short raid: however the raiding process may be somewhat further along the build up/cover cycle than is sometimes the case." [Note the big difference in this set of open interest numbers compared to the ones I posted in an earlier paragraph. - Ed]

In commentary I stole from Bill Murphy's lemetropolecafe.com yesterday, I see that Rep. Alan Grayson really laid the lumber on the Fed's General Council, Mr. Alvez, about whether they rig the markets and how much gold the Fed really has. It was an electrifying exchange to say the least. The link to the youtube.com video, which is well worth watching, is here.

Also lifted from lemetropolecafe.com yesterday was this mineweb.com story authored by Rhona O'Connell. The headline reads "New Central Bank Gold Agreement goes live on Sunday: But will anything really change?" It's well worth your time... and the link is here.

As was mentioned by the "usual New York gold commentator" in a prior paragraph, Germany's Bundesbank won't be selling gold in the first year of the new sales agreement. Here's the [very short] Reuters story about this as posted at the Interactive Investor in the U.K... and the link is here.

At the Silver Summit in Spokane, Washington, Sprott Asset Management's chief investment strategist, John Embry, expressed doubt that precious metals exchange-traded funds really have the metal they claim to have. The report comes from MineWeb.com's Dorothy Kosich and is headlined, "Sprott's Embry Warns Investors to Make Sure ETFs Backed by Precious Metals"... and the story is linked here.

GATA 's Chairman and secretary treasurer... Bill Murphy and Chris Powell... were interviewed for about 20 minutes on Friday by Eric King of King World News about the Federal Reserve's admission of involvement in gold swaps, gold's prospects generally, prospects for a congressionally authorized audit of the Fed, and the worldwide human consequences of the Western central banks' gold price suppression and dollar support scheme. This is an absolute must listen and the link is here.

It seems like the U.S. is out to change the rules at the IMF... and Britain and France aren't happy about it. "Under the U.S. plan, the IMF board would be cut from 24 seats to 20 with fewer European representatives." The story, from the Financial Times in London, is headlined "Tensions over IMF threaten to mar G20"... and the link is here.

And lastly is this story from The Telegraph in London. It's another Ambrose Evans-Pritchard offering. "Spain is sliding into a full-blown economic depression with unemployment approaching levels not seen since the Second Republic of the 1930s... and little chance of recovery until well into the next decade, according to a clutch of reports over recent days." The headline reads "Spain tips into depression"... and the link is here.

The Fed has been arbitrarily experimenting with artificial money and artificial interest rates with no corrections in basic theory or function for 95 years. At least three generations of financial adventures in policy have displaced long-standing traditions of probity and accountability. - Bob Hoye

Today's 'blast from the past' is from one of Sweden's best know exports... ABBA. No introduction is needed for either the song... or them. So turn up your speakers and click here. Enjoy!

I got an interesting e-mail from a reader yesterday. He sent me the Kitco gold chart from Thursday, September 24, 2008. That was also the day the jobs report was issued last year... and the graph looked virtually identical to the one from two days ago. And, as Bill Murphy over at lemetropolecafe.com has pointed out over the years, was the fact that virtually without exception, da boyz hit the gold market the moment that the jobs report comes out. Let's see if they do it again next month.

But having said all that, we have a very interesting last quarter of the year ahead of us. With all that's going on out there, I just get the feeling that something is about to go 'bump' in the night... especially in the precious metals. Are we going to get a monster sell-off to clean out the spec longs? Probably... maybe... but with all that's happening with the open interest numbers, Comex warehouse silver stocks, SLV withdrawals, the OCC and Bank Participation Report, I think I have enough data points to indicate that something big is afoot whether we get the bullion bank generated sell-off or not. Something just feels different this time around.

Maybe I'm just imagining things... or maybe it has something to do with the wine I'm drinking at 5:00 in the morning here in Edmonton. I'll be watching the gold open in the Far East on Sunday night with great interest.

Enjoy what's left of your weekend, and I'll see you on Tuesday morning.