Still Waiting For a Resolution: Either Up or Down

Gold didn't do much of anything in Far East trading yesterday... but came under some selling pressure shortly after London opened for business. By the time the Comex opened, gold had slid about $9... and that was its low of the day... $984.10 spot. From there, gold rose to it's high of the day [$996.60 spot] about 1:10 p.m. in the New York afternoon. Gold then got sold off into the Comex close and didn't do much after that.

Silver had its Tuesday high at the close of Sydney trading in the Far East yesterday... and from there it was a slow slide to its low of the day at the Comex open. From there, silver had a lacklustre rally before moving sideways after the Comex close.

I wouldn't read a thing into Wednesday's trading. The scale of the Kitco graphs above make the trading action appear more dramatic than it really was. As Ted Butler said, it's just another page off the calendar... nothing has been resolved in either direction.

Considering the price activity, the shares did much better than one would have expected. The Dow had a down day, so I was surprised [and pleased] that shares put in such an outstanding performance.

The usual New York gold commentator mentioned that gold open interest on Monday fell 4,960 contracts to 452,958 contracts. I have no report on changes in silver open interest for Monday. The cut-off for Friday's Commitment of Traders report was at the close of business in New York yesterday. The report will undoubtedly show an improvement, but it won't be much.

The last day for delivery into the September contract was yesterday; and, for whatever reason, the CME didn't post any delivery numbers in gold... but showed 24 silver contracts were delivered. Today is first day notice for delivery into the October contract... and if the CME website can be believed, they posted today's numbers shortly before midnight last night. They show [in gold] that a very large 4,383 contracts are to be delivered on October 1st. That's quite a bit for a non-delivery month. The big issuer was the Bank of Nova Scotia with a whopping 4,273 contracts... and the big stoppers were JPMorgan with 1,725 and Bank of Nova Scotia with 1,469. Silver deliveries showed only 21 contracts.

There were no changes in either GLD or SLV yesterday... no changes reported over at the U.S. Mint either... and over at the Comex-approved warehouses, another 393,394 ounces were added to their silver inventories.

The usual New York gold commentator had the following remarks yesterday... "India ex-duty premiums: AM $2.71, PM $2.80, with world gold at $993.28 and $990.70. The rupee softened today, closing at $1=R48.1 [Friday R49.97]. The stock market picked up 0.96%. The rupee's decline is, as usual, attributed to month-end payments for oil; [but] it might just as likely have been gold purchases."

"India has another bank holiday tomorrow [today - Ed], although apparently the gold market will be functioning. Clearly the world's largest gold buyer is supportive of world gold at this level."

"Vietnam local gold stood at an $11.37 premium to world gold of $992.10 early on Wednesday morning [Tuesday $8.83/$992.20]."

"The weekly European Central Bank statement of condition indicates a drop of €58 million in 'gold and gold receivables' [2.71 tonnes]. This is said to be the result of a sale by one captive Central Bank and 'the purchase of gold by another Eurosystem central bank.' Several times in recent months the ECB has used this phrase, interspersed with reporting purchase of, or for, coins. While it appears a European CB has started a modest sales program, it also looks as if one has an [even more modest] FX reserve purchase program underway."

"Mitsui has produced its monthly refinery survey. August was little changed from July, being mediocre, but the commentary sensibly concentrates on the events of September... 'In gold's latest assault on the $1,000... very different dynamics are at play in the physical market then was the case in Q1. While a never-ending supply of scrap was the lead story in the first three months of the year... as gold targeted higher plains, the same cannot be said this time around..."

"With the exception of the North American region, the physical market is, in fact, providing a certain support to the gold price. Yes, demand remains weak, but consumption rates have been uninspiring for many months. Rather it is the scrap side of the market we are paying close attention to; and, by and large, the lack of consistent metal flow provides a certain floor in the market."

"Fantastic amounts of scrap appeared from traditional Eastern buyers in Q1 -- even India, for the first time in a generation. This time, these markets appear to be modest buyers."

"As to the U.S., Mitsui says coin demand is weak, and scrap supplies quite strong. Actually, the coin dealer websites indicate that premiums are still being paid by these outfits for coin -- but nothing like the levels of Q1 when the public was in a buying panic. The scrap supply situation is not surprising: the weakness of the US$ since Q1 means Americans are seeing much higher prices than are the Asians. In summary, the physical market is much more bullish than it was in Q1."

"On Tuesday, gold saw its nadir early in the Comex floor session, down $8 in the December contract. It then rallied more or less evenly to an intraday high of up $3.10 around 1PM, before giving ground in the last half hour to close up only 30c. Estimated volume was 107,129 lots, of which only 22% traded in the second half of the session."

"The gold shares appear to expect more. The HUI closed up 3.16% and the XAU up 2.6%, both not much removed from their highs and paying no attention to gold's soft close... [which is] traditionally a bullish sign."

"NYMEX has produced Monday's final open interest. It fell 4,960 lots to 452,958 contracts -- 15.46 tonnes. Once again, since most of the volume in Monday's floor session appeared to take place on an upswing, it would appear short covering was the motivating force. Presumably this will calm those observers alarmed by the [COT] situation." [Not his observer! - Ed]

"The Bears are not doing well enough."

I note in a story over at zerohedge.com that "According to Nielsen, CNBC's annual decline in total September viewership was a massive 37%: the worst year-over-year performance in 2009...Although with CNBC now spending hours a day advertising GE engines, it seems like external advertisers couldn't care less: after all, GE is subsidizing its own station by selling them ad space. Business schools have a word for that: vertical integration. Sane people have another word: biased reporting." [That's why I've always called them CNBS - Ed]

I have another five stories today... all of which deserve your attention.

The first story is courtesy of Craig McCarty. It appears that the FDIC "is currently leaning towards asking banks to pay three years’ worth of its fees in advance" to get them out of the financial hole they're in. [Note to Sheila Blair: You'll need hundreds of billions, not tens of billions before the banking mess is cleaned up. - Ed] The story is headlined "FDIC considers calling for bank advances"... and the link is here.

The next story was provided by Casey Research's own Jeff Clark... not even the eagle-eyed King Report spotted this one last night. The whole world is heading where Japan already is. "Japan is sliding into the deepest deflation since the Second World War, forcing the new-broom Democrats to abandon their strong yen policy within weeks of taking office." It's a story from The Telegraph in London and is, of course, written by their International Business Editor, Ambrose Evans-Pritchard. The headline reads "Japan tips ever deeper into deflation"... and the story [which is very much worth the read] is linked here.

The next story is by columnist John Crudele of the New York Post. When I read it, I felt like I was reading something about the Watergate tapes scandal way back in the Nixon administration of the 1970s. The headline reads "The secret to Goldman Sachs' good fortune"... and the link is here.

The next story is from The Wall Street Journal and was filed from Kochi, India. This story will give you, dear reader, some insight as to how deeply gold is ingrained in the Indian culture. Over there, gold is the money of first [and last] resort. The headline reads "Out From India's Alleys, Gold Loans Gain Respect". I thank Donna from Florida for passing it along... and the link is here.

Today's last piece is the long read of the day... and it is quite long... but a must read. New York Magazine's Joe Hagan has just written a wonderful profile of the pseudonymous market analyst and polemicist behind the crusading Zero Hedge Internet site, Dan Ivandjiiski, whose recent disclosures of U.S. government documents [CIA and Federal Reserve] confirming gold market manipulation, have powerfully reinforced GATA's work. The profile is headlined "The Dow Zero Insurgency" and the link is here.

Whenever there is some trouble in any area of the economy, the simplest solution to many people is 'Let the government fix it.' Yet... every time the government uses its money or its power to favor this group or that... the net result is such a web of supports, subsidies, interventions and controls, that it is almost impossible for a nation to find its way back into a dynamic system of really free enterprise. - Lawrence Fertig

As Ted Butler said earlier in this column, it was just another day off the calendar as far as market action in both silver and gold went. Nothing has been resolved either to the upside or downside. I was happy with the price action of the precious metals shares yesterday... and I hope it means something... but who really knows? Certainly not me. So, until this market hatches into something in either direction, I'll begrudgingly sit on the fence until it does.

I note, as I write this last paragraph, that there was some positive activity during Far East trading earlier today... plus there's a price spike during morning trading in London [9:50 a.m. over there] that has put gold back over the $1,000 mark. Let's see what the U.S. bullion banks [with the Treasury and the Fed pulling the strings] do with this when the Comex opens... if they don't show up in London trading to spoil the party there instead.

I hope your Wednesday goes well... and I'll see you on Thursday.