The Bullion Banks Get Stuffed!

The gold price did almost nothing in Far East and European trading on Friday. But, as I stated yesterday, the odds were more than excellent that 'da boyz' would hit the gold price the moment that the employment [or lack thereof] numbers were released. Of course the numbers were God-awful... and the gold price got slammed for about $11 in just a few minutes. But out of nowhere, buyers showed up and took gold up over $20 to its high of the day. This is the second day running [see the chart below] the gold has had a 'white knight' show up while the bullion banks were attempting to trigger a waterfall decline in the gold and silver prices, in an attempt to flush out the spec longs.

Silver's chart pattern was similar, but its price was sold down much more aggressively than gold's after the day's high [$16.49] was set at about 10:35 a.m. in New York.

Needless to say, the activity in the U.S. dollar was a factor in today's price activity, but when the boyz hit the 'sell gold' button... they hit the 'buy dollars' button at the same time. The effect of that only last about two or three minutes... as gold 'fell' it's $11. If they hadn't done that, then the dollar probably wouldn't have done a thing. Then someone with really big pockets hit the 'buy gold'/'sell dollars' button. The dollar low came at precisely 10:00 a.m. Eastern time. This was an orchestrated move in gold, silver and the U.S. dollar. Things like this don't happen just by chance. Here's the intraday US$ chart.

One would have thought that the share prices would have done better, but it's obvious that a lot of precious metals shareholders are prepared to hit the 'sell' button at the faintest hint of weakness. At this juncture, who can really blame them. I'm still 'all in'... but I'm sure the day-trader types are pretty nervous.

Like I said yesterday, I'm not going to comment on open interest changes in either gold or silver until the several open interest reports that various commentators use, start to show the same numbers. Gold open interest [along with silver's, I'm sure] fell on Thursday... as the usual New York commentator points out further down.

The Commitment of Traders report came out yesterday afternoon. In a nutshell, the bullion banks decreased their net short position in silver by a laughable 249 contracts. Right now the net short position in silver [for positions held at the end of trading on Tuesday, September 29th] sits at 64,106 contracts... 320.5 million ounces. The full-colour COT graph for silver is linked here.

In gold, there was a larger decrease in open interest, but it hardly made any noticeable difference in the record net short position. The bullion banks decreased their net short position by 12,376 contracts, and are currently net short 275,234 contracts... 27.5 million ounces of gold. The full-colour COT graph is linked here.

As per usual on Friday, Eric King of King World News interviewed silver analyst Ted Butler. It nearly goes without saying that you have to listen to this... and I think you should stop reading at this point and do exactly that. The link is here.

For whatever reason, the Chicago Mercantile Exchange did not update their delivery report for either gold, copper or silver yesterday. Maybe Monday. Over at the GLD ETF, there was a minor addition of 39,234 ounces. At the SLV a smallish 113,612 ounces were withdrawn. The U.S. Mint had another update on gold eagles yesterday... up another 12,500 in the month so far to 15,500. In silver eagles they reported minting another 57,000... bringing October's total up to 257,000. The Comex-approved warehouses showed that a smallish 30,153 ounces of silver were withdrawn.

The usual New York gold commentator reported the following yesterday... "India was completely closed today.... and as noted last night, local Vietnam gold stood at an $11.01 premium to world gold of $999.40 early on Friday morning... which is a robust response to abruptly lower gold. The TOCOM very prudently laid low."

The NYMEX website has published its version of Thursday's trade: on actual volume of 120,796 lots [11.2% above estimate] open interest fell 10,526 lots [32.74 tonnes] to 448,165 lots. Considering the price slide to the down $8.60 close, was on some fair volume. It would appear there was long liquidation. Open interest has not been lower since September 4th." [But it's still in nose-bleed territory. - Ed]

"NYMEX has not responded on the question of the divergence developing between their website's open interest and the data they supply the trade and news wires." [Which, until they get their reports straightened out, is precisely why I don't want to mention it in my own commentary. - Ed]

Today, of course, Comex gold was hit by heavy selling immediately before/after the Employment data, and saw its nadir as the US$ firmed right afterward. December gold got as low as down $13.70. When the dollar reversed, so did gold: including Euro gold: this was not merely a dollar adjustment. December gold got as high as up $9.10 Estimated volume at 10:00 am. was a very heavy 96,361 lots."

"Considering the absence of bullion's largest market, India... this is an impressive performance." [Yes, it is! - Ed]

A couple of news stories that I'm only going to mention in passing. I see that the U.S. Treasury has announced another $138 billion debt auction next week... and, in a Washington Post story I note that General Motors' sales plunged 36% in September compared with August... Ford plummeted 37%, and Chrysler dove 33%. With the 'cash for clunkers' program now history, this should be no surprise, as it cannibalized future sales.

There just isn't any good news out there. The 3-year chart of the Philadelphia Banking Index looks ominous. If I actually owned any bank stocks, I'd be selling them at the open on Monday.

I have four stories today, and since it's the weekend, I hope you have time to read/listen to them all. The first one is a banking story that was filed over at Bloomberg. "The number of U.S. lenders that can’t collect on at least 20% of their loans hit an 18-year high, signaling that more bank failures and losses could slow an economic recovery... 26 firms with more than one-fifth of their loans 90 days overdue or not accruing interest as of June 30 -- a level of distress almost five times the national average -- according to Federal Deposit Insurance Corp. data compiled for Bloomberg News by SNL Financial, a bank research firm. Three reported almost half of their loans weren’t being paid." A bank is normally considered insolvent if more than 5% of it's loan base is overdue, so it's obvious that there are lots of zombie banks out there... and these are only the ones that the FDIC knows about. The story is a longish read and bears the headline "Banks With 20% Unpaid Loans at 18-Year High Amid Recovery Doubt"... and the link is here.

The next two stories were ones that I borrowed from the King Report. The first one is from The Telegraph in London. "The British manufacturing sector shrank for the second month in a row in September, a survey indicated, triggering fears that a brief recovery which began in July has started to lose momentum." This is a world-wide problem which is getting worse with each passing month. The headline reads "Manufacturing sector recovery loses momentum"... and the link is here.

The second story from the King Report is from the website of business.timesonline.co.uk. The rather startling headline reads "Beijing moves to halt growth as supply starts to outstrip demand"... and the link to the story is here.

Today's last story is a GATA release. Eric King of King World News interviewed GATA's secretary treasurer [Chris Powell] for 11 minutes about the U.S. government gold price suppression documents recently unearthed and disclosed by Geoffrey Batt of the Zero Hedge Internet site. This is well worth listening to and the link is here.

The New Deal began, like the Salvation Army, by promising to save humanity. It ended, again like the Salvation Army, by running flop-houses and disturbing the peace. - H.L. Mencken

Today's 'blast from the past' is not that old. The guitarist playing it is not that old either. The tune has had 4.2 million hits for a very good reason. This is the most awesome guitar playing I've ever seen... the fret work is over the top! What is it... and who is it? It's Guitar Boogie as played by Tommy Emmanuel... and the link is here. And do try to remember to breath in and out as you watch and listen...or is it 'as you listen and watch?' Enjoy!

Friday's activity in the gold market starting out totally as expected, but didn't end that way. Gold's reversal of fortune was a complete surprise to me. It appears that there are some rather large forces currently in play in the gold market. That's why I'm 'all in'... correction or no correction. If you, dear reader, are still sitting on the fence in this bull market in both gold and silver, I urge you to give serious consideration to signing up for Casey's Gold and Resource Report. It's still only $39/year for a subscription... a hair over $3/month! To find out more, click here.

Enjoy the rest of your weekend and I'll see you here on Tuesday morning.