Another All-Time High Close for Gold

Gold set a new high price again yesterday, but the volume was so light [estimated 63,200 contracts], that I wouldn't read much into it. Ditto for silver, which had an estimated volume of 15,500 contracts. The big spike up in silver at the open in Far East trading on Monday morning looks impressive, but it was achieved on only a handful of contracts The precious metals shares didn't show a lot of enthusiasm either.

Open interest for Friday's trading in gold showed another increase in o.i... up a smallish 2,326 contracts on decent volume of 130,506 shares. Total gold open interest is now 502,513 contracts Silver o.i. was also up as well... 831 contracts on 27,975 contracts to a total open interest of 133,944 contracts. These are big numbers.

The Bank Participation Report was not posted at the CFTC's website again yesterday. I guess it was because of the Columbus Day holiday. Maybe today it will go up today, as this isn't the first time they've been late.

Because of the holiday, the CME did not update the Daily Delivery Notices yesterday, so I expect there will be activity reported today. There were no changes at either the GLD or SLV... and the U.S. Mint showed no updates either. Last week at the Zürcher Kantonalbank in Switzerland, their gold ETF showed a smallish decline of 12,693 ounces... and their silver ETF declined 489,499 ounces, the first drop in their silver inventory that I can remember in the last six months. I thank Carl Loeb for those numbers. The Comex-approved warehouses indicated that 487,879 ounces were added to their collective inventories.

The usual New York gold commentator filed a report on Sunday about Friday's action... "Friday saw gold peak around the PM fix of $1,051.50 during the NY morning, said by MKS to be the result of a poorly handled buy order. The bulliondesk.com reported hearing a Central Bank was the culprit and the buying 'massive'. The MKS version seems more plausible. Gold then sold off on low volume to finish with a $7.70 loss in the December contract at $1,048.60. Open interest, now 502,513 contracts, has not been this high since March '08 at the height of the first attempt on $1,000: it peaked then at 506,515 contracts. This is quite a battle."

"A number of commentaries say that physical off-take is weak. More significant, probably, is an MKS remark that scrap arisings are also weak. This is a ringing contrast to Q1/09."

Then came this commentary yesterday... "India was not an importer today. The rupee softened, although it halved its earlier loss. The stock market was strong, closing up 2.31%"

"HDFC Bank, one of India's top importers, has given an interview to Reuters confirming that activity has picked up as usual at this time of the year, but predicting that imports will only be half last year's. These predictions are not worth much IMO: Indian gold demand is so responsive that a $50 down-spike lasting less than a week could transform the situation. Interestingly, HDFC reports significant growth in large [1kg] bar investment demand. So sophisticated investors are not entirely forsaking gold for financial instruments, as widely predicted a few years ago." The link to the Reuters story is here.

"Vietnam's local gold premium stood at $1.47 to world gold of $1,047. Japan was closed on Monday."

"Barclays notes that 'speculative interest' and 'gross long positions' as shown in the CFTC data are at record levels." [No kidding! - Ed]

"At some point, this apparently extended technical posture, is going to attract in a major gold seller -- perhaps even a commercially-motivated one. From the point of view of the fathers of Indian brides [vintage 2009], this cannot happen too soon. It will be a major buying opportunity." [Yes... it will - Ed]

There were a lot of stories out this weekend that I feel you should be aware of, and before I get started, I just want to alert you to the fact that this is one of the rare times that every story is worth your total and undivided attention from one end to the other. I have prioritized them [to a certain extent] in ascending order of importance, but they all should be read regardless of where they are in the pecking order: first, last... or in between.

The first is a Bloomberg piece that showed up on their website early Monday morning. This is the second story in a week I've run on Iceland...but this one shows how bad things have become, up close and personal... as the prior story was just about the Icelandic banks. It's a bit of read, but there are lessons to be learned here, so I urge you to invest the time in it. The headline reads "Iceland Shrinks 8% as Prices Increase 11% in Deepest Recession"... and the link is here.

Here's a gold story [thanks to Kitco] from the Gulf region's tradearabia.com website. In it, Tocqueville Asset Management's John Hathaway, gets some ink in a story headlined "Gold rally to continue says expert"... and the link is here.

The next item is a story that came out in Friday's Financial Times in London. In it, columnist John Dizard took note of one of the many official documents recently disclosed about the gold price suppression scheme. But he did so in a misleading, incomplete, and mocking way. But notice is notice... Step 2 in Gandhi's dictum: "First they ignore you. Then they ridicule you. Then they fight you. And then you win." Just as, if not more, important than Dizard's article itself, is the preamble by GATA's secretary treasurer, Chris Powell. Sounding more like Thomas Jefferson or Andrew Jackson... Powell hoists Dizard on his petard. It's wondrous to read... and I urge you to do so. The link to the GATA release is here.

Next is another wonderful piece [including an equally wonderful graph] from James Turk over at goldmoney.com. Turk says that... "Gold’s short-term and long-term uptrends have now been re-confirmed. The $1010-$1012 area should now act as support, but I doubt if we will see [even] those levels. I don’t expect much of a pull-back here." Needless to say, this very short essay will warm the cockles of every gold bull's heart... and the link is here.

In yet another GATA release is this condensed version of U.S. Republican Ron Paul's valedictory speech to the 2009 New Orleans Investment conference on the weekend. Fortunately GATA's secretary treasurer, Chris Powell, was there... and since he's been in the newspaper business all his life, who could ask for a better person to record the highlights of the speech than him. The link to the article entitled "Gold, peace, and prosperity," Paul tells New Orleans Conference"... is here.

In commentary excerpted from his latest newsletter to private clients, silver market analyst Ted Butler argues that the trader position limit in the U.S. silver futures market should be 1,500 contracts... a small fraction of what are currently held by the largest U.S. bullion banks. Butler's commentary is headlined "The Box Canyon"... and the link is here.

And lastly is another GATA dispatch. This is the speech that was given at the New Orleans Investment Conference last Thursday by Chris Powell, GATA's secretary treasurer. In it, Powell's comments centre on the "many spectacular disclosures of what central banks meant to be surreptitious intervention in the currency markets to suppress the price of gold -- particularly intervention by the central bank of the United States." And there have been quite a few! It's a long speech with many links... but it's a must read in every respect... and the link is here.

There are no markets anymore... only interventions. - Chris Powell, Secretary Treasurer, Gold Anti-Trust Action Committee, Inc.

Well, despite James Turk's wonderful essay, I still remain firmly on the fence. The open interest has been ticking up every day in both gold and silver. The cut-off for Friday's Commitment of Traders is at the end of trading this afternoon... so unless both the gold and silver price get hammered today, the next COT will be another one for the record books.

The 3-year gold chart below says a lot. Past history indicates that a short, sharp [and maybe brutal] sell-off lies in the near future. But is past history a useful tool at this point in time? Don't know... and as you know, dear reader, I'm always on the lookout for "in your ear"... and I'd love to be proven wrong.

However, we can always hope that it will turn out like it did starting in July 2007... as the chart pattern starting in July of 2009 looks similar. I'd love to have it turn out that way, but we'll only find out in the fullness of time. As you are more than aware, neither the gold or silver markets trade freely, as the bullion banks now hold a record short position in gold, and are going short against all longs in all categories.

And as I put this commentary to bed in the wee hours of Tuesday morning, I note that there are some interesting developments in early London trading, with both gold and silver showing vertical price spikes to the upside. Could a rather 'disorderly market' be in store for us as the day progresses? It will be interesting to see how the U.S. bullion banks react to this when trading begins in New York this morning... unless they surface in London trading sooner than that.

We can only wait it out and see what happens.

See you tomorrow.